Help with 401K loan math? Compared to HML?
Hello, I would like some help understanding the math related to taking a 401K loan.
- I have a 401K which allows up to $50,000 loan for any purpose
- 6.5% interest
- time period can be 6 to 60 months
- it is paid back with bi-weekly payments taken from my paycheck (after taxes)
So originally, I thought 'oh great, a loan at 6.5% sounds good'. Now I'm realizing that even though I'm paying myself back, I'm using after-tax dollars to do it.
What's the real interest rate if you consider the after-tax component?
Wondering if a HML is actually better option if judging by the numbers only?
Any help is appreciated?