What if he takes a loan against his 401k, to pay down debt? I’d go for the car if the limit for such a loan isn’t sufficient to pay it all off, mobility is necessary for continued employment.
He’d be paying himself back, with interest, which would lock in a rate of return, protect his principal so long as he is able to repay, and the only real consequence of “defaulting” would be a tax bill on the amount not repaid.
Sounds like it’s potentially a way to kill two birds with one stone, so to speak.
A 401k loan would still be debt. I believe that the interest rate for such a loan would be 10%. I pay less interest on my auto loan and for my credit card. I looked into taking out a 401k loan to pay down the debt, then rolling my IRA into the 401k to repay the loan (avoiding the penalty and taxes) but that is not legal/allowed. You can't pay back a 401k loan with untaxed money.
“What if he takes a loan against his 401k, to pay down debt? “
You are right, that is certainly an option, and it could be a good one. It depends on the financial situation, because if you default on the loan to pay back what you borrowed from your 401k, then the loan converts to an early withdrawal, and you owe taxes and penalty, when you already disposed of the money and how is he going to pay that — now the IRS will be after him too.
The “goodness” of a lot of the potential options depends a lot on indivicual circumstances.