So I know 401K loans are generally a terrible idea. But...through my recent divorce I have amassed more than 40K in federal back taxes. I do not qualify for an order in compromise and the IRS's suggested monthly payment plan is more than I can afford. I have been regularly paying what I can against the debt, but that's not even making a dent. I don't have a home for the IRS to place a lien on, and I know the debt is considered canceled after ten years, but that's a long time off, and they can still seize assets from my bank accounts and garnish my paycheck.
I'm thinking of doing the full $50K to not only pay off the IRS, but outstanding credit card debt/medical bills and to pay for much needed car repairs.
I qualify for a $20K debt consolidation loan through my bank, but that doesn't cover the entire debt, the interest rate is horrible, and the payments are more than I can afford. The 40K loan interest rate is great and the payments are doable, plus I would lose all my monthly payments to the IRS and credit card companies. And the funds would be available quickly.
Is there any universe in which this is a good idea? I don't plan on leaving this job, but you never know what's going to happen. And I while I can make the payments, I don't have a concrete plan to pay off the full $50K in five years.
Once my debt is gone, and the interest rates hopefully even out, would taking out a regular loan to pay off the $401K loan be an option? Or am I just robbing Peter to pay Paul? Help!