But this extra tax doesnt add up to that much money. If you borrow 1,000 and pay it back at 5 over one year, the interest is only 50 a year. And if you pay 15 in taxes on that 50, your tax hit only amounts to 7.
Thats trivial compared to the costs of a payday loan, or even a credit card loan. Possible Penalties. The biggest risk of a 401k loan is that you absolutely must pay it back on schedule.
If you dont, the unpaid portion of the loan gets treated as a withdrawal.
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