There is a fast-approaching investment opportunity (January) that I very strongly believe will have significant short-term (2x - 5x within a matter of months) and long term returns. I need approximately $10k - $20k that I don't comfortably have in savings at the moment.

Would it be better to take out a home equity loan, or withdraw early from my 401k? Let's assume I'm borrowing $20k. (My home is valued at $294k according to Zillow, and I have $149k left to pay, so my LTV with a home equity loan would be around 57%. And I have about $147k in my 401k. I'm 40 years old.)

Are there even better options?

  • 5
    The investment opportunity sounds sketchy. I wouldn't risk your retirement funds or investing borrowed money on something that is a "Sure thing 2x-5x return in the short term" This absolutely screams scam from everything you have said.
    – JohnFx
    Nov 22, 2021 at 14:00
  • 5
    Better option: don't throw your money away in what is most likely a scam.
    – chepner
    Nov 22, 2021 at 14:48
  • 2
    Why is the investment opportunity “fast approaching”?
    – quid
    Nov 22, 2021 at 18:21
  • 1
    I wouldn't withdraw from retirement or take a heloc for an NFT project, unless you have an insanely high risk tolerance. Nov 23, 2021 at 23:03
  • 1
    Oh man.... run away.
    – quid
    Nov 24, 2021 at 1:40

2 Answers 2


Let's look at it from a pros/cons perspective:

401(k) pros:

  • No required payback


  • ~50% tax and penalties on withdrawal.
  • Permanent loss of value if you don't replenish it.

Home Equity Loan Pros:

  • Low interest
  • No penalties


  • How are you going to pay the loan back if the investment is a bust?

Another option (depending on your 401(k) plan) would be a hybrid of the two - a 401(k) loan. With that you borrow from your 401(k) and "pay yourself" interest as you pay back the loan. But it has similar pros/cons:


  • Interest goes back into your 401(k)


  • Still need to make sure you can make payments if the investment goes bust
  • The loss of future earnings is generally higher than the interest you "pay yourself"
  • The entire loan may be called if you leave the company

The bottom line is that borrowing money to invest is very risky. It greatly increases the risk that the whole thing unravels and you end up losing the investment but still have debt to pay back.

  • 2
    A 401(k) loan may not be available - depends on the plan.
    – yoozer8
    Nov 22, 2021 at 14:37
  • @yoozer8 Thanks, added.
    – D Stanley
    Nov 22, 2021 at 14:38
  • Another possible option would be a cash-out refinance of the mortgage. Depending on the interest rate the OP can get, this might even be advantageous. The balance vs value suggests that the mortgage might have been taken out some time ago, at a higher interest rate than currently available.
    – jamesqf
    Nov 23, 2021 at 4:04
  • Nit: if your employment ends with a plan loan outstanding you aren't strictly required to repay it, but if you don't the balance is treated as a distribution and subject to tax (including 10% penalty) -- unless you can and do roll-over that amount to an IRA or another qualified plan, and beginning this year (2021) you have until Oct of the following year to do so. Nov 26, 2021 at 0:52

If you don't have the money already to make an investment, don't borrow it! Don't borrow it from your retirement funds, don't borrow it from the equity in your house, don't borrow it from friends or family. Why? Well, what are you going to do if the "investment opportunity" doesn't pan out the way you think it will and you end up losing all or a significant portion of the investment. Do you have the financial resources to be able to repay the loan (even if it is to yourself) if the investment goes bust, in addition to your other financial obligations?

On the other hand if you already have money set aside for investments like these, can afford to risk losing all or a major portion of it without causing yourself and your family undue hardship or stress AND know enough about the investment to consider it a safe bet, then by all means go ahead and make the investment, because that is how rewards are reaped.

Also, that last bit about KNOWING enough about the investment is really important, and there is a world of difference between KNOWING and BELIEVING. Don't just believe it because someone told you or convinced you about how good the investment opportunity is, or how it is a once in a lifetime, limited opportunity, available only to early investors kind of story! As they say "caveat emptor" or "buyer beware".

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