General loan against TSP

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luv2surf

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I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.
 
luv2surf said:
I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.
Click to expand...

Well, before you were to tap your TSP for a loan I would first take a hard look at your living expenses/budget.

- Are you on a budget?

By that, I mean do you actually have a written-out budget, detailing each and every expense that you follow month-to-month?

If you do not, I would advise against tapping your TSP and advise that you get on a budget so you can free up some money to pay off those credit cards.

Begin with the credit card that has the highest interest rate.

If you are interested in a user friendly budget sheet, just shoot me a PM and I will be hapy to send you the one I use month-to-month.

Final note- a budget is not for those who are "broke". Everyone should be on a budget regardless of their financial position. It's important to always know exactly where your money goes... cent-for-cent.

-Rod
 
:cool:Loans are very touchy subjects on this board. You are right, over the long haul you may save yourself some interest and stabilize your credit. But that money is not working for you.

I thought there was a sticky on the loan discussion but I can't find it right now.

Here's my two cents:

The market is not making alot of money right now. So, if you take out a loan and pay it back quickly, you may not lose to much on the retirement earnings.

If the market swings big to the green side, that money isn't working for you.:cool:

Whatever you do, YOU have to feel comfortable that it will give you peace of mind now so that you will have peace of mind later.

Of course, ROD types faster than me!!!!!
 
Well, I recently have been looking at my budget and unfortunately these credit cards are talking quite a bit of disposable income away so would be nice to pay some of them off and maybe even cancel them. The budget program was using is a simple one from Microsoft Works where I put in all my expenses. Some questions I have are: Am I taxed on the income I get? For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan?
Thanks....:)
 
Frixxxx said:
Um Kevin, I went through this budget and I'm a little confused.

Do I put my cocaine purchases on the entertainment line, or

the *blow money line????:laugh::laugh:

Disclaimer: In no way were any coca plants grown, harvested, or processed for this bad joke!!!!!!
Click to expand...

The original Coca Cola Receipe, aye ! :nuts:
 
Frixxxx said:
Um Kevin, I went through this budget and I'm a little confused.

Do I put my cocaine purchases on the entertainment line, or

the *blow money line????:laugh::laugh:

Disclaimer: In no way were any coca plants grown, harvested, or processed for this bad joke!!!!!!
Click to expand...

I know that was a joke because nobody snorts cocaine anymore. They smoke it. :laugh:
 
luv2surf said:
For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan?
Thanks....:)
Click to expand...

1 - Only if you don't pay the loan back. Then it becomes a distribution. I don't think it's an option to not pay it back...

2 - I have. I went from 15% contribution down to 5% and put every last dime I have toward debt. My truck will be paid off next month freeing up $330/month and by the end of the year I should owe for nothing but my house.
 
luv2surf said:
Well, I recently have been looking at my budget and unfortunately these credit cards are talking quite a bit of disposable income away so would be nice to pay some of them off and maybe even cancel them. The budget program was using is a simple one from Microsoft Works where I put in all my expenses. Some questions I have are: Am I taxed on the income I get? For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan? Thanks....:)
Click to expand...

With Interest Rates down, Could'nt you refi to get a lower rate and pull out
just enough cash to payoff the cards. You could also make Principle Only
payments with the difference between your old payment and new, just
to get your cost of refi'ing (included in the mort) paid down quicker.

The end result would be a easier Mortgage Payment, Credit Card Debt Free
and a higher FICO score (initially). This is something I did in 1997 when
I was facing $35k of unexpected (long story) C.C. Debt. It certainly beats
touching your retirement account, as its a real no-no. ;)
 
luv2surf said:
I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.
Click to expand...

Again, I still think a Refi could possibly help you more then a HELOC. It
all depends on your current interest rate on your current mortgage. With
the average being around 4.50% - 5.50% this would be my first consideration
as a loan through your TSP costs you potential compounded gains on that
money as well. (its not just the 2.3% you pay yourself). ;)

If the Mortgage idea isn't possible and a Home Equity Loan or HELOC is not
a cost effecient alternative, then the TSP Loan might be your only alternative.
Remember, the TSP Loan has no pre-paymant penalty, should you find some
extra bucks at tax time.
 
Regarding this loan, I could still refinance my house...but not right now since my credit card debit is high. (Banks may not want to mess with a refinance with me since I have quite a bit of debt). If I find that I can eventually do a REFI after paying off some debt, then I can possibly pull money out from the REFI and pay back some or all of my general loan against the TSP. That way, I can hope to re-coup some of the loss I might incur. Complex situation and not clear cut as I see it. :worried:
 
BTW, here's the automated budget sheet I use. I don't use all the categories. But, you can simply tailor this sheet IAW your needs. The point is to account for ALL spending.

Good luck!
 
Don't take out secured extra debt on your house to pay off unsecured cc debt. This is not normally a good practice,(altho, I too have been guilty of that in the past when I was young and didn't know any better-- live and learn). Sounds like you have a good plan with a tsp loan.

Good luck.
 
Rod said:
Ummm, NO. My form is not from Dave Ramsey. Nice try, though.
Click to expand...

My post wasn't a reply to your post. Not sure what made you think it was. :confused:

Now THIS post...you know...the one with a quote from you in it? This IS a reply to a post you made. :D
 
I took out a TSP General loan to pay down my credit cards. Here's the way I see it. I still had to re-evaluate my budget to prevent myself from getting back in dept in the first place.

TSP debt does have it's advantages. I'm currently down almost 10% this year, but half the money is tied up in the loan so it's not all that bad. All dept is evil but if you're going to owe someone it minus will be yourself.

Credit card dept is EVIL and those bastards can change your rates at any given time with little to no notification.

IMHO I'd only go for it if you are able to STRICTLY ADHERE to a budget that will prevent you from getting back in dept.

Best of luck... JTH
 
Get your 5% match but contribute no more to TSP untill you're out of debt.

Cut spending to the bone. Ramen noodles. Mac-N-Cheese. Don't see the inside of a restaurant unless you work there. Deliver pizzas. Have a yard sale. Sell stuff. Make the dog, cat and kids nervous because they think they're going to be next. Make your friends think you've lost your mind. If my truck wasn't so close to being paid off I'd sell it and buy a beater. Do you have a car payment?

What ever budgeting method you use...make sure you know where EVERY penny goes and why. It's the only way.

My vote is for you to NOT make a TSP loan. Grow a set and pay for the crap you've already bought.




























Sorry...didn't mean to go off. :o :D
 
Thanks to all the replies. I agree about the strict budget. Without the budget, spending will get out of hand and it did for fairly long time. I don't actually know where all that money has gone to. I am a family man and the wife does the shopping so it is my fault for not overseeing and doing a little bit of the shopping myself.

I have already put the request in for the loan. But, I will back down my contribution to 5% like you said.
thanks again :cheesy:
 
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