There are a number of companies that provide the facility of taking a 401(k) loan to its employees, but it has been noticed that not many employees borrow money from this loan to meet their urgent needs for liquid cash. On the other hand, there are some people who believe that there is an exact time of taking a 401(k) loan. Before taking a loan from this plan, there are some things that should be considered:

• The borrowing limit of the loan
  The 401(k) plan decorum is designed by the Internal Revenue Service. As per its norms, one can borrow a minimum amount of $1,000 and a maximum amount of $50,000 when taking a loan from this plan. One cannot exceed the upper limit for taking the loan.
• The loan is offered for a fixed time period
  Before taking a 401 (k) loan, one must consider that it comes with a fixed time period for repayment. This means one has to repay the entire amount in a predetermined time period.
  The 401(k) loan usually comes with a repayment period of 5 years. Some companies also allow their employees to take multiple loans, but this will also add to the time duration of the loan.
• The time of the commencement of repayment
  The loan repaying system will be commenced soon after one has received the loan amount, and they will be informed about their first pay period. An automatic deduction facility works to deduct EMIs, along with the proposed interest rates, from their paycheck every month. In this case, they may not get 30 days for the repayment period.
• Checking the credit score is not mandatory
  A 401(k) loan allows one to take a loan from their own retirement funds. As they are not borrowing cash from any other sources or from a third party, checking of the credit score is not mandatory. However, they have to pay interest on the loan because the retirement funds will be inactive for the next 5 years.
• The loan is dependant on the employment status
  While one is planning to take a 401(k) loan, their status of employment is to be taken into consideration. If they have been dismissed from their job or have left their job and default the repaying method, the amount will be distributed evenly, and it will be equipped with an additional charge of early distribution penalties.
• Tax issues are important to be considered
  During the repayment period, one has to remember that the repayment options are available on the after-tax dollars from their paycheck. Otherwise, the amount taken as 401(k) loan will be trapped in tax issues.

All the above-mentioned things should be kept in mind while considering a 401(k) loan. On the basis of these, one can easily decide whether or not it is beneficial to borrow from this retirement fund.