When buying a business, is it better to take a home equity loan or borrow from my 401k?

The whole point of putting money into a 401k in the first place is to defer tax on your investment until you withdraw it. (You funded it with pre-tax dollars).

You will repay your loan (albeit to yourself) with dollars you have already paid tax on, and will be taxed again at retirement on the same money.

As others above mentioned, there *could* be tax benefits to using a HELOC, but you should consult a tax advisor, since sometimes the benefit is negligible, or non-existent depending on your personal tax situation.

Neither.

Instead, get a HELOC. This is a revolving line of credit secured by the equity in your house. Depending on the state you live in you can get up to 90% of appraised value.

The beauty of a HELOC instead of a regular home equity loan is that the interest is calculated differently.

The federal government has special laws that provide incentives for lenders to write 30 year mortgages.

That's why when you start out in a mortgage (or a home equity loan) the majority of your payments for the first seven years are almost all interest and very little applied to principle.

HELOCs are calculated differently. The rates are typically prime -.1%. The interest on say a $25,000 balance is about $130 per month right now.

If you pay $1,000 per month on a HELOC, $870 of that goes to principal and $130 goes to interest. That same payment on a mortgage or a home equity loan reverses those numbers - most of what you pay is pure profit for the bank!

And the interest you do pay is tax deductible.

Don't touch your 401k. That's a bad habit to develop. The next time it'll be easier to tap into it... You get my drift.

Almost all 401k's will not let you borrow for something like that. And if you do and don't pay it back that year, it becomes taxable income to you. One of the worst decisions you could ever make. See your plan details. Even if you could, it's a terrible idea. Go the home equity loan route. Chance are, you can get a tax deduction on the loan as home interest expense.

Depends on how much you're talking about. If it's a relatively large amount then probably better to take the HEL as the payments can be spread out over a longer period and thus the minimum payment is lower.

If it's a smaller amount then the 401k loan because it has no fees and you're not risking your home. Additionally it won't ruin your retirement if you default. By smaller amount I mean less than 15k.

I WOULD DEFINETLY CHECK INTO SMALL BUSINESS LOANS OFFERED BY THE GOVERNMENT...KINDA LIKE A VA LOAN...THE INTEREST IS MUCH MUCH LOWER...AND THE QUALIFICATIONS ARE NOT AS STRICT AS A BANK. I WOULD NOT BORROW ON YOUR 401 K. SAVE THAT FOR A REALLY NEEDY RAINY DAY. YOU NEVER KNOW WHAT MAY HAPPEN. YOU CAN GET ONLINE AND RESEARCH FOR YOUR SMALL BUSINESS LOANS. AND I WOULD NOT BORROW ON YOUR HOME OR USE THE HOME EQUITY. THERE ARE ALOT OF ALTERNATIVES THAT CAN HELP YOU OUT THERE. HOPE THIS ANSWERS SOME OF YOUR QUESTIONS.

Many homeowners apply for home equity loan for a variety of reasons. While some want to utilize the money to get rid of unmanageable debt, others want to add value to their existing home by restructuring and repairing. Whatever may be the reason, the home equity loan<!--provides a homeowner the quickest and easiest means to get extra cash to meet unavoidable expenses.In many cases, lenders are too willing to offer you home equity loan for the simple reason that the loan is secured by your property.

http://best-loans.awardspace.com/homeloans.htm

The market is flooded with so many loan products from lending institutions that offer you excellent terms and conditions and leave no stone unturned to publicize their schemes on televisions and print-->All this may leave you feeling baffled and confused about which home equity loan product to pick. Before choosing which lending institution to go with, make sure to do some research. Shop online to obtain home equity loan quotes from different financial companies.

HEL, hands down. Tax ads!

401k tax penalties!

Pretty sure that you will find every financial solution at: loandirectory.info-

RE When buying a business, is it better to take a home equity loan or borrow from my 401k?

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