Can a 401K Be Used To Do Velocity Banking?

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🏦 INFINITE BANKING CONCEPT


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[sassysusie]

I did a $5k loan last year from my 401k, with the 5 year repayment plan, and at a 9.25% interest rate. I paid it back in less than 9 months and I found it to be an easy process. My plan allows contributions while you have a loan, so I did not have to stop contributing. Also, my plan also allows early payoff, and I could make extra payments at any time. It was a very easy process to take the loan. There was a loan fee of I think $100, which didn't bother me at all. I really liked that the interest went back to me and it did not get paid to a bank. I am considering taking one again, and just using it to fast forward my debt pay off process.

[ksmith]

Another con is if you somehow can’t pay back that loan, it would convert to a withdrawal and you would owe a high tax rate on that money.
I think if you leave the job, you may have to pay back the entire loan immediately, but I’m not 100% sure on that.

[pollymcdonald]

I would like to borrow from our 401K to pay off our credit card debt in order to raise our credit score, which was cut short during the pandemic due to our credit limits all being radically cut. We have no bankruptcies, no collections. We are looking to get the loan, pay down the debt, and once our credit score bumps up enough—we would like to leverage a HELOC, and pay off the 401K loan.

[dionboose]

I plan to take a 20k loan and put it as collateral for a secured credit card. And use that card as a loc to pay off debt…

I think if I use my credit cards, banks may cut my credit limits as I pay them down.

So id rather try to do a balance transfer and pay debt down over time via balance transfer to secured credit card.

[funnyperson]

Can you use 401k loan like a revolving credit line where you can have an outstanding loan balance and then take out another loan?

Could you theoretically put 100% of your paycheck into 401k, charge all expenses on credit card and then borrow as needed at the end of the month to settle your credit card statement to avoid interest on your card?
(Infinite banking concept which is just reverse velocity banking because rather than taking out a loan up front to pay off debt, and putting all your money into debt tool, you’re putting all your money into asset vehicle up front and taking out a loan at the end to avoid debt.)

[funnyperson]

Donnel Stiddum on YouTube has said there’s a lot of restrictions with employer and a lot of downside with traditional 401k loan which is why he says to get a self directed 401k and I think he prefers using MPI which I’m not as on board with yet as it just is a infinite banking policy with UIL but leveraged with call spreads and debt. Risk is a hidden cost and you have to pay fees for someone else to add risk but it might work for some people… so you can in your 401k contribute to another vehicle and use that for your loans from which you could then do velocity banking inside of a vehicle that can do infinite banking. So the asset can take out chunk loans to pay principal payments into a mortgage or payoff debt. Probably if you have high interest debt you’d attack that first using velocity banking but there are a lot of interesting ideas.

SBLOC using the buy borrow die strategy is an alternative, basically you can contribute your paycheck up front to a vehicle such as a bank that is the custodian of your assets, never sell it, and instead get an SBLOC securities backed line of credit to tap into the equity value as needed for funds and velocity banking purposes.

[candicemiller]

Should I pay off 401k Loan before paying off credit card to increase paycheck?

[workuse]

Couple more cons: it uses after tax money to pay it back, so you could pay more taxes in the end of the year. Your opportunity cost of you having the money in your in your 401k is pretty substantial as well.

[Lushaholic]

I am considering taking out a loan against my 401k, but I am relatively unclear on how I would "charge" my monthly expenses until the loan is paid off.

For example:

50% of my 401k = $35, 000
Remaining balance on house = $130, 000

I apply $30, 000 towards the principle, bringing remaining balance of house to $100, 000.

If I park monthly income back into 401k, to pay off the loan, how would I inturn use that remaining loan to pay for monthly expenses?