March 10, 2008 • June Walbert
Q: I need $7000 to
purchase a car. Would you suggest that I go to the car dealership or through my
401K plan to get a loan?
-Anthony, Browns
Mills, NJ
A: In my opinion, one overused “benefit” of many 401(k) plans is
the ability to take a loan. I recommend you avoid taking such a loan unless you
are really in a bind! Although, it may
seem like a good deal, it will stunt the growth of your retirement portfolio
and hinder your long-term plans.
So, before going in that direction I would check your credit
score and shop around. The car dealership may be a good option, but you should
also check with local banks, credit unions, and even online to find the best
loan. When evaluating your options, you
will want to look at the interest rate, term, and any conditions. For example,
there should not be a prepayment penalty. Keep that savings and
investment momentum going!
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About USAA
USAA or its affiliates do not provide tax advice. Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor. The information is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional representation before acting on any information you may have found in this article. This article is in no way attempts to provide advice that relates all personal circumstances.
Examples given are hypothetical illustrations and not an indication of the benefits or features of any USAA product. You should seek policies and advice based upon your own particular circumstances. Sample loans are for illustration purposes only and are not a rate quote, pre-approval, or commitment to lend.
June Walbert is a CERTIFIED FINANCIAL PLANNER TM practitioner with USAA Financial Planning Services, one of the USAA family of companies.
USAA Financial Planning Services® refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
USAA means United Services Automobile Association and its affiliates. Banking products provided by USAA Federal Savings Bank. Credit cards provided by USAA Savings Bank. Both Banks Member FDIC.
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