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I have an opportunity to retire an outstanding debt

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jdesim1
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I have an opportunity to retire an outstanding debt  Reply with quote  

I have an opportunity to retire an outstanding debt (promissory note) for half the balance due. The note outstanding balance is $21,375 which I have been paying back at $125/month. It is the last debt from a short sale of my home two years ago. I can settle it for $10,687. I do not have savings enough to cover that amount.
Would it be a good idea to take a short term (36 month) loan from my 401k to settle this note? I realize that 401k loans are not usually the best way to go but the long term savings are appealing.
What other questions should I be asking? What downside is there?
Post Sat Nov 09, 2013 3:22 pm
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oldguy
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It depends - if your credit is already ruined, then accepting a 'deal' won't hurt you too much.

Your $125/m is barely paying 7% interest - so you are not repaying any of the $20,000 principal.

Your lender loaned you $20,000, the only reason that they will accept less is that they think that you are going to fail to repay the loan - and 50% is better than nothing, ie, they are hoping to cut their losses.

Deoending on your state's laws, the $10,000 that the lender is giving you may be counted as income - you may owe the Fed & State Income Tax on it.
Post Sat Nov 09, 2013 4:34 pm
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coaster
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If you take the deal, make sure to get written documentation from the lender that the settlement discharged the debt so that it goes on your credit report as "paid"

~Tim~
Post Sat Nov 09, 2013 5:14 pm
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