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Ladder Advisors vs. 401k Loan: 2 Bad Reviews

If you are facing financial challenges like many Americans today, then you may be thinking about all different options to raise some extra cash.

One option is to respond to those direct mail offers with unrealistic, suspicious, and too good to be true low interest rates – similar to what Ladder Advisors and has been flooding the market with.  Ladder Advisors is also known by Carina Advisors, Jayhawk Advisors, Corey Advisors, etc. In times like these, it is important not to get desperate and act impulsively.

Another option is a 401k loan. Experts agree that a 401k loan is not the best finance choice. Due to the immense risk involved, it should be your last resort. If you do choose to go ahead with it, then you should have viable 401k loan strategies in place to mitigate the risks involved.

Unfortunately, many Americans will be thinking about taking out a 401k loan due to the unprecedented financial crisis in the wake of the coronavirus epidemic. 401k loan strategies are the need of the hour.

The coronavirus pandemic has created immense uncertainty for millions of Americans. Several businesses have closed down and many people have lost their jobs. Since they are unable to work, ordinary citizens find that they have no way of making ends meet, besides taking out a 401k loan. Just to understand the gravity of the dire circumstances, consider the fact that over 10 million US citizens have filed for unemployment benefits. This number is likely to grow as the coronavirus pandemic drags on.

401K Loan Strategies

Many Americans who are struggling to meet their expenses are now considering taking out a 401k loan. However, before you make a hasty decision, you must realize how such a loan can jeopardize your future. The 401k plan is your investment for the future. It is the portfolio that you have built up over several years to take you through the long years of retirement. Taking out a 401k loan can put your retirement plans in peril.

There is a real risk that you may not be able to realize your long-term objectives if you are unable to pay back the 401k loan. The 401k plan is your nest egg that you amass over the year through deductions to your pay and through employer contributions.

However, if you find that you have no other option, you might think about taking out the higher of 50% of your 401k account or $50,000. Just recently, US President Donald Trump signed the CARES Act. This is a relief measure for the coronavirus crisis that will allow you to take out at least $100,000 from your 401k account. You will have to pay back the loan in 5 years in most cases.

Alternative Options Under 401k Loan Strategies

The first part of 401k loan strategies is to look for other options. As strange as it may sound, the best 401k loan strategies entail avoiding a 401k loan as far as possible. The reason for this is that a 401k loan can be a big gamble for your financial future.

Book a consultation with your financial advisor about your financial situation and possible alternatives. Under 401k loan strategies, you should also think about other loans that you currently owe. If you have other loans, you should talk to your lenders and negotiate with them to postpone payment or to agree with an alternative plan that will ease loan payment.

Under 401k loan strategies, you should look towards stocks and mutual funds that you can sell off in order to raise cash. Under the current circumstances, you may have to sell them at a loss, however, you might still benefit from the tax benefit. Other 401k loan strategies involve tapping into other available assets like your home equity. You can take out a home equity line of credit, as a result.

A home equity line of credit is also called HELOC. You may consider it a second mortgage against your home. This may be a good idea nowadays since interest rates are currently very low. It may be wise to raise money through a HELOC by taking advantage of the low interest rate. Hence, a HELOC may be a viable alternative under 401k loan strategies.

You can also search for low interest rate personal loans. You should go shopping for these loans using the most popular finance apps available that allow you to compare interest rates between several lenders so that you can pick the best possible personal loan for yourself. Using finance apps to search for personal loans is also one of the possibilities under 401k loan strategies.

Borrowing from a well-off family member may also be a good choice under 401k loan strategies. But, you must be sure to write down the amount of the loan and the terms and conditions in order to avoid ruining relations with your family members. If done right, this option may also be part of 401k loan strategies.

Make sure that you never borrow from payday lenders. These lenders are the modern-day version of the shady loan shark. The interest rate they charge is exorbitant can easily run well above 400%. People want to know about the facts of payday loans and not the insidious fluff doled out by these predatory lenders. The fact is that payday loans are a debt trap that will most likely drag you into a debt collection scenario. No wonder they are banned in some states and have severe restrictions in the rest. Payday loans cannot, under any stretch of the imagination, be included under 401k loan strategies.

If you have exhausted all your options and find that there is no other choice besides taking out a 401k loan, you must first check to see if such an option is available in the first place. Not all employers allow taking out 401k loans. If this option is not available, then you should inform your employer that the CARES Act allows employees to draw out such loans.

If you do take out the loan, make sure that you take the smallest amount possible to minimize the risk.

Bottom Line

Whatever you do, remember that a 401k loan should be your last resort. Such a loan is inadvisable due to the several risks it entails. However, if you find no other recourse, you should resort to 401k loan strategies while taking out such a loan.

Always talk to your financial planner or advisor before taking out a loan and talk to them to understand the best possible 401k loan strategies.

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