5% rate on 401k loan.What are the pitfalls in doing this?Visa debt of approx $20k with much higher interest rate.

It is rarely a good idea to take money out of your 401k.

''But l will be paying myself back with interest'' you say.

Hogwash. If something happens and you quit or get fired before it is paid back, you will be obligated to pay it back immediately or suffer the fees and penalties associated with a 401k withdrawal.

Why not just lower or suspend your 401k contributions and throw that money at the credit cards?

Well, this is an accident waiting to happen. If u buckle down & say ur salary is 70K a year u can very well buckle to the point u pay 10K a year in credit card debt. Personal finances r 80% behavior & 20% math if u work hard to pay the credit card u will feel it u will make an effort & deprive yourself of things to do this if u take out a loan u r just masking the debt & since it was so easy u will very easily get back up in debt again using the credit card. If u think u will close the card & not use cut it up, make the loan & attack that debt with vengance.

Get the book The Total Money Makeover by Dave Ramsey, he shows u the snowball method to get out of debt fast in 2 - 3 years. l followed it & it worked. If u do not like to read u listen to him online for free.

The main pitfalls of using a 401k loan to pay off debt is in the risks u undertake.

First, if something happens & you're unable to make the loan payments, u will have to pay the taxes & withdrawal fees that u avoid by taking a loan rather than a withdrawal in the first place.

Second, & probably more important, is how sure u r that u will be able to avoid racking up the debt on the credit cards again after paying them off. If u have a willpower problem, this can be a big problem because u could end up having the loan to repay plus fresh debt to deal with.

This is not a judgment on what got u the debt in the first place, it is just a fact. You need to be absolutely sure that u r not going to charge the debt back up before u consider a 401k loan to repay it.

If u r sure u can handle the temptation & you're pretty certain nothing is going to happen that could make u unable to make the payments, a 401k loan can be a good way to deal with debt.

You're not paying the withdrawal costs of taking the money out completely, you're paying the interest back to yourself on the loan instead of a bank or other lender, & you're getting rid of the high-interest credit card debt.

Just make sure u know what you're getting into before going ahead with it, & that u can handle the potential pitfalls.