General loan against TSP

**luv2surf** · 01-21-2009, 09:14 PM

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.

**Rod** · 01-21-2009, 09:47 PM

Originally Posted by luv2surf

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.

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

**Frixxxx** · 01-21-2009, 09:50 PM

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.

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!!!!!

**KevinD** · 01-21-2009, 10:07 PM

I know, I know...Dave Ramsey.

Heres a simple "zero" budget form from Dave Ramsey that you can look over.

https://www.mytotalmoneymakeover.com..._flow_plan.pdf

Debt Snowball

http://www.daveramsey.com/etc/cms/in...ContentID=4055

Good Luck!

**Frixxxx** · 01-21-2009, 10:13 PM

Originally Posted by KevinD

https://www.mytotalmoneymakeover.com..._flow_plan.pdf

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????

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

**luv2surf** · 01-21-2009, 10:50 PM

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....

**squalebear** · 01-21-2009, 11:31 PM

Originally Posted by Frixxxx

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????

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

The original Coca Cola Receipe, aye !

**KevinD** · 01-21-2009, 11:33 PM

Originally Posted by Frixxxx

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????

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

I know that was a joke because nobody snorts cocaine anymore. They smoke it.

**KevinD** · 01-21-2009, 11:40 PM

Originally Posted by luv2surf

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....

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.

**squalebear** · 01-21-2009, 11:41 PM

Originally Posted by luv2surf

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....

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.

**squalebear** · 01-21-2009, 11:50 PM

Originally Posted by luv2surf

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.

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.

**luv2surf** · 01-22-2009, 12:02 AM

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.