Author Topic: Invest or payoff loan  (Read 1723 times)

network4food

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Invest or payoff loan
« on: March 08, 2018, 07:55:39 PM »
I relocated in 2010 when the housing market was pretty soft and borrowed 50k from my 401 to fund my new house.  I recently sold the original house and now have the money to payoff the loan balance of 34k.  Should I hold / invest this money and continue with the loan or simply payoff the balance?

Particulars...
salary 90k
Current home equity 120k
401k 530k without loan balance
Roth 35k
No other debt besides mortgage.

capitalninja

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Re: Invest or payoff loan
« Reply #1 on: March 09, 2018, 04:52:44 AM »
Pay off the loan.

MustacheAndaHalf

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Re: Invest or payoff loan
« Reply #2 on: March 09, 2018, 07:11:47 AM »
If your job lets you go, don't you owe the loan back almost immediately?  Otherwise you'd pay taxes and penalties on it like a withdrawal from your 401(k)?

With that in mind, I'd repay the loan so you don't have to deal with that situation.

network4food

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Re: Invest or payoff loan
« Reply #3 on: March 09, 2018, 10:02:29 AM »
That's correct.  My (maybe irrational) concern is putting the lump sum back in the market via the 401k when it might be due for a little pullback.

RWD

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Re: Invest or payoff loan
« Reply #4 on: March 09, 2018, 10:34:57 AM »
That's correct.  My (maybe irrational) concern is putting the lump sum back in the market via the 401k when it might be due for a little pullback.

There's nothing wrong with lump sum, especially not over a relatively small amount like $34k.
http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

If you had already paid back this loan would you remove $34k from your investments just because the stock market is "due" for a pullback? That should give you your answer.