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Sometimes, when you’re in a financial bind, the best option for some quick cash might be a 401k loan.

First, you should try to avoid any financial situation that involves taking out a loan. This can be achieved by having an emerging savings fund of at least 3-6 months worth of expenses.

However, if you are still desperate for some money and you want to avoid a personal loan, then perhaps a loan from your 401k is the way to go.

A 2016 study from Scarborough Capital Management found that 12 percent of Millennials have used 401k loans to buy their first home. This is a higher percentage than other age groups.

What is a 401k loan? And under what scenarios — if any — should you actually consider a loan from your 401k as an option? Let’s find out!

What is a 401k loan?

With a 401k loan, you are borrowing the money from your 401k to pay for important things. Obviously, the money in your 401k is intended for retirement only — but some people do use the money as a loan.

Legally, individuals can borrow the lesser of $50,000 or 50 percent of their 401k. The money must be repaid to your 401k account with after-tax dollars — event if it is a traditional pre-tax account.

While 401k loans should be avoided, there are some people who live by them.

The Pros

There are a few scenarios where a 401k loan might be appropriate. For example, if you are desperate and your 401k is your last resort for a loan, then it is OK.

You should compare it with a personal loan from a bank. If the personal loan has an outrageously higher interest rate than what you would normally make from your 401k investments, then it is OK to use it.

Most importantly, you have to make sure that you are on outstanding financial footing before you even consider this option. The reason is because you have to pay back the loan, and if you lost your job, you could be in financial peril.

The Cons

For most people, a 401k loan should never be a realistic option.

If you are unable to repay your loan from your 401k, then you could get hit with a ridiculous tax bill. Additionally, you might get hit with a lot of fees from your financial institution.

Unlike a mortgage or student loans, 401k loans are not tax deductible. That’s why you should never use one to buy a home or pay for school.

More importantly, if you take the money out of your 401k account, then you are missing out on potential investment growth. After all, the keys to growing your retirement account are time and savings.

To summarize: a loan from a 401k is bad and should be avoided.