I took a 401(k) loan to facilitate a move across state (My wife is a newly graduated physician who took a residency offer near our new home). I up and switched jobs in the same career field to stay with her, and failed to properly vet the organization I was joining. As such, I am switching companies to one that I have had more time to properly vet and have a discussion with.
We have enough emergency money to cover expenses even if I lose my new job in the first couple weeks of having it. Using the emergency money to cover the outstanding 401(k) loan is not an option, as it would introduce an unacceptable level of risk into our finances. The field I am in has such a desperate lack of qualified workers that I can be assured of a new offer within a week of losing a job (though the company may be unsavory).
I am exploring options for mitigating the financial loss that would occur should I default on the outstanding 401(k) loan (~10k USD). I can handle the tax and penalty hit should I need to, but I feel I have other options available.
I can take out an unsecured line of credit for the outstanding balance at a 5.5% APR (credit score over 770 at last report), which will be a significantly reduced cost in the long run, but will up my cash outflow in the short run, thereby increasing risk. I can mitigate that risk by taking an identical 401(k) loan after the new plan allows, thereby seating myself back in the same situation, with a small cost of transaction.
As far as I see, those are the three most prominent options (Take the hit, including taxes; cover the gap with an unsecured line of credit; or use an unsecured line of credit to bridge between 2 401(k) loans) . I'm not asking for a decision to be made for me, rather, I'd like to cover the pros and cons of each option to minimize my mistakes and risks. I am relatively inexperienced as far as juggling debt goes. If it matters, the 401(k) account for both companies will be with the same lender on a similar-but-not-identical plan setup.
The answers thus far hit on our unwillingness to pay down debt. To forestall another post point out that debt is a choice (I agree, it is), I will lay out where our income is going.
My wife will not make a doctors salary until she has completed her 4 years of residency. Until then, our household income rests at roughly 120k USD annually (dependent on my overtime). Her student loans cost nearly 4,000 USD monthly, and our only consumer based debt is her car at under 400 USD monthly. We do use a joint credit card, but never beyond what we can pay off that month. Neither of us has ever owed or paid any interest on a credit card. The 401(k) loan in question costs 427 USD monthly; with a mortgage of just under 1,100 USD monthly, that puts the present (not future) cost of the decision to own a house at par with renting an equivalent apartment in the area.