If you know the basics of 401(K) loans, you would realize that this loan is for a situation where you can borrow money from the fund you have saved up for your retirement years, with an intent to repay it to yourself. However, even though you may be borrowing money that is yours, it remains a loan where interests are charged.

Along with understanding the basics of 401(K) loans, you may want to find out if there are any feasible alternatives to this plan. In other words, while borrowing from yourself is an easy option, you will be surprised to know that there are also other options to get cash in an emergency so that your retirement savings stay untouched.

Alternatives to taking a 401(K) loan
Among the basics of 401(K) loans is the understanding of alternatives to taking this loan that you need to think about before making a decision to borrow from your 401(K) plan:

• You can always tap into your emergency savings, which may be the right thing to do.
• You can consider taking a personal loan as its terms are simpler and payments hassle-free. With this option, you won’t need to disturb your retirement savings at all. However, such loans may not be instant, and you may need to wait a while.
• A home equity loan is a great option that lets you borrow equity against your house if you are a homeowner. Using this option, you can take out as much money as you need whenever you need it, up to a certain pre-approved limit, of course. The interest rates are low, but the home is the collateral in this case.
• You can choose secured personal loans by putting up your home, car, or any other personal asset as collateral and get low-interest rates, better terms, and fewer risks.
• You can resort to crowdfunding by starting a campaign on any crowdfunding platform and asking your friends, family, and others in your social networking circle to offer small donations to help you financially.
• You could also borrow from family members, which means taking an unofficial loan. It will not hamper your credit score, and you will also not need to pay any interest.
• In case you have other investments, it may be a good idea to cash those in before you touch your retirement savings.
• Some employers are starting to realize that borrowing from 401(K) plans is not in the best interest of the borrower, so they have started educating employees regarding the long-term impact of taking such a loan on their retirement funds. They have also begun offering alternatives like home-equity loans or Employee Stock Purchase Plans (ESPP). That way, employees can sell their stocks in the ESPP instead of borrowing from their 401(K) plan.
• Employers can also make partnerships with third parties, who can provide their employees with low-cost loan options so that employees can repay loans through payroll deductions and do not need to put their retirement funds in jeopardy.
• Employers can consider launching employee financial wellness programs to provide free education to employees on different topics like how employees can avoid debt, invest for retirement, live on a budget, and such.