However, there are pitfalls.
If you leave your job, you’ll have to pay all of the loan back, usually within 30 days. If you don’t, it will count as a distribution and you’ll pay a penalty.
“Unless you have good job security and you know for sure that nothing is going to happen, I tell people to be very cautious taking 401(k) loans,” Parks said.
Pay less for loans
If you need to borrow money, here’s a good strategy.
Join a credit union. It’s similar to a bank, but it’s not exactly a bank.
Credit unions are not-for-profit organizations that exist to serve their members. Like banks, they can accept deposits, offer loans and provide other financial services. Your money is federally insured in a federal credit union up to $250,000, under the National Credit Union Administration, an insurer of accounts.
One difference is that credit unions are member-owned cooperative institutions. Banks are commercial, for-profit enterprises. When you put your savings in a bank account or take out a loan, you are a customer. Any profits go up the chain to the shareholders.
Use credit cards
Refinance your home
Once you’ve saved that $1,000, for example, Rosen says, a logical next step is finding other cuts. “There are all sorts of thrifty ways to save on the things you want to keep in your life,” he said. You might swap cable for a cheaper streaming service, ditch a credit card with a high annual fee, or cancel an annual membership.
Normal financial wisdom doesn’t always apply in abnormal times. If finances are tighter, it might be a time to stop aggressively paying down a loan, says Tony Zabiegala, a chartered retirement planning counselor and vice president at Strategic Wealth Partners in Independence, Ohio.
You can also create income by temporarily reducing your 401(k) contributions. “At least contribute up to the match,” Zabiegala said.
Side hustle how-to
One relatively easy way to increase income: the side hustle.
You can pick up extra cash in a variety of ways, but be sure to report any extra income on your tax return.
Nearly half of working Americans have a side hustle outside their main jobs, Bankrate found in a 2019 survey of 2,500 adults.
Even in a healthy economy, a third of working Americans with a side hustle said the extra income was essential to help meet their regular living expenses, according to the survey.