# Quick 401 K Question **URL:** \ **Category:** Factual Questions\ **Created:** [October 7, 2002, 10:34pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274 "2002-10-07T22:34:40Z")\ **Posts on this page:** 6\ **Page:** 1
**Author:** ![Nevermind](https://avatars.discourse-cdn.com/v4/letter/n/53a042/32.png) [@Nevermind](https://boards.straightdope.com/u/Nevermind)\ **Post date:** [October 7, 2002, 10:34pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/1 "2002-10-07T22:34:40Z")
I have always heard that there is a penalty for removing money from a 401 K for personal use. I have a friend who is going to “borrow against” (as he puts it) his 401k to buy a car. He says he is going to put the money back in installments over the next year. This does not sound right to me, what’s the scoop? ---
**Author:** ![Tequila\_Mockingbird](https://avatars.discourse-cdn.com/v4/letter/t/41988e/32.png) [@Tequila\_Mockingbird](https://boards.straightdope.com/u/Tequila_Mockingbird)\ **Post date:** [October 7, 2002, 10:40pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/2 "2002-10-07T22:40:42Z")
That is allowable in most 401K’s. You can take a loan out from it without penalty, and it’s repayed with automatic deductions from your paycheck, along with interest. A withdrawal though can get you penalized up to 40% in taxes. ---
**Author:** ![Chubbs](https://avatars.discourse-cdn.com/v4/letter/c/47e85d/32.png) [@Chubbs](https://boards.straightdope.com/u/Chubbs)\ **Post date:** [October 7, 2002, 10:41pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/3 "2002-10-07T22:41:04Z")
You can take loans on your 401K. Depending on who is running the 401K you can take 1 or 2 loans out. However if you don’t pay it back you have to pay up the wazoo in taxes. I think like 40%. That is whay you can never take more than half on a loan. ---
**Author:** ![zev\_steinhardt](https://avatars.discourse-cdn.com/v4/letter/z/97f17d/32.png) [@zev\_steinhardt](https://boards.straightdope.com/u/zev_steinhardt)\ **Post date:** [October 7, 2002, 10:42pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/4 "2002-10-07T22:42:54Z")
The catch, however, is that if you leave your job, you have to pay the loan back within a short period of time (30 days, IIRC). If you don’t, then it’s considered a withdrawl and gets taxed and penalized up the wazoo. Zev Steinhardt ---
**Author:** ![Nametag](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nametag/32/406_2.png) [@Nametag](https://boards.straightdope.com/u/Nametag)\ **Post date:** [October 7, 2002, 10:43pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/5 "2002-10-07T22:43:58Z")
401(k) loans are a part of most 401(k) programs. The loan must be paid back on a reasonable schedule, and pay a reasonable rate of interest. It’s a terrible idea, though, even in the best of times, and particularly bad when there are 0% car loans out there. If he doesn’t pay back the loan on schedule, penalties will be assessed. ---
**Author:** ![Nevermind](https://avatars.discourse-cdn.com/v4/letter/n/53a042/32.png) [@Nevermind](https://boards.straightdope.com/u/Nevermind)\ **Post date:** [October 7, 2002, 11:08pm UTC](https://boards.straightdope.com/t/quick-401-k-question/131274/6 "2002-10-07T23:08:24Z")
Well, no bank is going to loan him the money for a 1957 Dodge something or other. He says it is a “once in a lifetime opportunity” I think his head is up his wazoo, personally, but whatever floats his boat. Hopefully the interest isn’t too high. This is the 2nd time he’s borrowed on this account–isn’t their a limit on how often you do this? I feel like this should be an “emergency only option”.