401(k) Loan vs. Debt Settlement: How to Handle Credit Card Debt

A 401(k) loan and debt settlement are two options for tackling credit card debt, but financial experts rarely recommend either as a first resort. Borrowing from a 401(k) preserves your credit score but depletes retirement savings and carries tax risks if you lose your job. Debt settlement can reduce what you owe but severely damages your credit history and may trigger a tax bill on the forgiven amount.

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