A person with $12,000 in credit card debt due to unexpected expenses and a pay cut is considering taking a loan from their 401(k) to pay it off. They have three options: paying off the credit card, taking a 401(k) loan, or taking out a personal loan. The best option financially is to take a personal loan from the 401(k.

Taking a loan from the 401(k) and replenishing it with interest would be a smart move, costing less than paying off the credit card. Missing payments would not affect your credit report, but job loss could lead to penalties. Another option is a personal loan with a lower interest rate, costing around $16,000 over five years.

It’s advisable to focus on high-interest credit card debts first and consider budgeting and financial counseling services to help manage and pay off debt effectively. Having a plan and seeking support can make getting out of debt more manageable. With determination and sound financial decisions, reducing debt is achievable.

Read more at Yahoo Finance: I have $12K in credit-card debt due to health issues and a 30% pay cut. Is it finally time to take a loan from my 401(k)?