And if your employment situation changes, you might have to repay your loan in full in a very short time frame. If you can't repay the loan for any reason, the remaining loan balance is considered a withdrawal and you may owe both taxes and a 10% penalty if you're under 59½. ...
Another benefit: If you miss a payment or default on your loan from a 401(k), it won't impact your credit score because defaulted loans are not reported to credit bureaus. Cons: If you leave your current job, you might have to repay your loan in full in a very short time frame. ...