Take loan against 401k or Balance Transfer to credit card?

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I have about $3500 between a credit card and a student loan (avg interest rate is 8%)...I am thinking about doing a balance transfer to a credit card at 3.9% for the life of the balance transfer or pulling money out of my 401k. Which makes more sense? Loans against 401k is with an interest rate of 5.25% for a term of up to 60 months (with about $150 in fees).

Also, if I could do 0% for 15 months on a credit card balance transfer - would you recommend that?

Take loan against 401k or Balance Transfer to credit card?

401K loans are almost always a bad idea. You get taxed twice, and depending on your age, you could lose out on a ton of $ when you retire. Once you're contributing enough to your 401K to get the maximum match from your employer (typically 6% of salary), open a Roth IRA and contribute some money each year. You can take a loan from your Roth IRA without penalty (it works great as an emergency money source).

I would do the 0% balance transfer and work hard to pay off the debt in the next 15 months. If after 15 months you haven't paid it off, find another 0% balance transfer deal and do it again. When money was tight I used this method and it worked great, just be sure to read the fine print so that you don't get hit with transfer/cash advance fees.

Take loan against 401k or Balance Transfer to credit card?

It's never a good idea to take a loan against your 401k.

Not only do you loose some compounding interest on the money withdrawn, but if you leave your job, the amount is typically due in full immediately.

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Take loan against 401k or Balance Transfer to credit card?

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