Guys and Gals, I am about to take out a home equity loan to pay off my 401(k) loan ($33,800) because I am switching jobs (just accepted the offer tonight!). I of course don't want to pay an early withdrawal penalty for not repaying the money prior to leaving my current job and it looks like this is my only option. Any advice on this or other things to look out for when switching jobs (rolling over 401K, etc...)? Thanks!

 

Well, for the HE loan, I would try LendingTree.com to get a good rate. I thought we were able to negotiate a good rate (prime -.50% at the time), and I went onto LendingTree and got Prime -.77% and I am self-employed. So the rate was better even though it wasn't a traditional loan like the previous one was. I have used LT twice since we've been here to refinance our HE and never had any problems.

As for rolling over your 401k... just make sure when you transfer it to wherever (new company, bank, etc) you do not touch the check and it is never made out to your name. Have your existing 401k company write the check directly to the new plan, whether it be through work or a bank. If the check is made out to you... even if you just directly deposit it into a new plan, you will have to pay penalties and fees.

.

 

Acutally, the above is not true. Some firms, like Fidelity, will only send the check to you and not directly to the rollover.

What they'll do (and I just went through this)...

FBO Your Name
Brokerage Firm here

blah blah


You need to make it clear to your current 401K holder that this will be a rollover. When you get the 1099 in the mail, it'll have on there that is was a direct rollover. That is what the IRS looks for.

 

Yes, that is true too. Sorry Blue. If they do what Scrib mentioned (FBO your name and then list your brokerage firm), you are covered as well.

How could I forget that b/c I had to do that last time around

 

Thanks for the info. Yeah I am definitely doing a direct rollover, probably to Vanguard (401k is in Citistreet which I don't like very much due to lack of choices). Also going to roll my pension over because I understand I have to pay a penalty for taking the lump sum now? My girlfriend currently works at a credit union and she can get prime -2% for the HE loan but she wants to quit and doesn't necessarily want to be on my loan, so we are looking into that. I also belong to a credit union that has decent rates so I may go that way. Problem is most of them have application fees (as much as $150) that aren't refundable unless you take their loan so you kind of have to choose one and go with it. I am considering Lending Tree if the prime -2% thing doesn't work out. Cool thanks, you got me thinking now...

 

Ended up getting a $30k HE Loan through my credit union for 6.25% . The best Lending Tree came up with was 7.50%.

 

Not bad.

Sometimes, you can check out any new bank branches in your area. They sometimes have really good rates as a promotion for HELOCs.

 

Home Equity line of credits usually have a higher rate than Home Equity Loans.

The best I got for a Home Equity line of Credit Was prime - 0.5% as my line was less than 75k. If it was over that, it would have been Prime minus 1.

6.5% for the Home equity loan is a pretty good rate. No minimum payment option tho.

 

PS. DONT USE LENDINGTREE, THEY ARE NOT A LENDER THEY ARE A LEAD GENERATOR. THEY WILL TAKE YOUR INFO AND SELL IT TO LENDERS. YOU CAN USE THEM JUST EXPECT YOUR PHONE TO RING OFF THE HOOK WHEN THEY SELL YOUR INFO TO 20 COMPANIES