IBEW
Kashable and Purchasing Power -- Re-Payment Terms vs. 401k Loan
LEGAL DISCLAIMER: No information on this site is "financial advice".
If you haven't heard the "news" yet, the company is now working with 2 separate loan companies to allow represented employees to get "fast and easy" loans, with the primary benefit being that the payments will come directly out of your paycheck. There are a few catches, of course, so it's important to read all the fine print of the loan and even compare it to the 401k loans that might even be a better option for you.
Kashable offers loans from $250 to $20,000 with 6% to 35.99% rates and repayment terms of six to 24 months. While these loans MAY offer better interest rates than a 401k loan, it's important to verify those rates for yourself, as the rates available to you will be different from those available to others.
A couple of the biggest catches with Kashable, in my mind, are really just reasons why a 401k loan is better (if you have been here long enough and have enough saved in your 401k):
Other considerations when it comes to Kashable is how easy it is to get in touch with someone that works there if you have a problem. They are not a local company, as their headquarters are in New Jersey. I would highly encourage you to read reviews from different sources so that you understand some of these "unforseen" pitfalls a little better.
As for Purchasing Power, I don't believe there's a hard inquiry to originate the loan. However, a lot of prices they offer are 50% higher or more than what you'd pay if you had bought the product somewhere else (especially on sale, with a coupon code, used from Marketplace, etc.). That is the reason that they're offering you a "0% loan", because they're charging you the interest upfront. May not be a terrible idea for someone in need... but at the same time, it would be wise to develop a savings plan instead of getting loans for things that you don't need and can even potentially hurt your credit score, causing you to get higher interest rates later in life.
And my last note... while it might seem like taking a 401k loan is NOT helping your long-term savings, taking a 401k loan out today for 9.5% interest is NO different than getting a 9.5% loan and, at the same time, watching your 401k balance grow at a guaranteed 9.5% rate. The market rate seen by your 401k could be better than 9.5%, but it could even drop negative (as it has done more than once over the past 3 or 4 years). Taking a 401k loan out BEFORE such a drop would be the most ideal time to start a 401k loan, but of course we cannot possibly know what the true market rate will be in the future. This loan calculator that is linked to on our Links & Resources page only somewhat proves my point. That calculator actually misses the extra gains you would see if you got a 401k loan out right before the market were to drop 10%, for example.
We're all adults, but many people tend to skip over the fine print. Whatever you choose to do, PLEASE make sure you do your due diligence in researching and understanding the terms and payment plan you are agreeing to so that you don't get caught missing a payment, which your employer won't be able to help you with. These are contracts between you and Kashable or Purchasing Power, not your employer. You can take a sneak peak at the terms (without your custom interest rates & payment plan) on our Docs & Forms page.
In solidarity,
Jason "Vito" Vitosky
Business Manager
IBEW Local 733
LEGAL DISCLAIMER: No information on this site is "financial advice".
If you haven't heard the "news" yet, the company is now working with 2 separate loan companies to allow represented employees to get "fast and easy" loans, with the primary benefit being that the payments will come directly out of your paycheck. There are a few catches, of course, so it's important to read all the fine print of the loan and even compare it to the 401k loans that might even be a better option for you.
Kashable offers loans from $250 to $20,000 with 6% to 35.99% rates and repayment terms of six to 24 months. While these loans MAY offer better interest rates than a 401k loan, it's important to verify those rates for yourself, as the rates available to you will be different from those available to others.
A couple of the biggest catches with Kashable, in my mind, are really just reasons why a 401k loan is better (if you have been here long enough and have enough saved in your 401k):
- Kashable will only hit your credit report with a soft inquiry to verify the interest rate of your loan, but when you actually accept the loan terms, you will have a hard inquiry on your credit report, which typically pulls your credit score down a bit. Not a huge deal, but 401k loans have zero credit inquiries.
- Kashable will NOT send you any notice (other than maybe if you check their app or website?) that you have missed a week's payment (say, the 2 weeks at Christmas or if you're on medical leave), which will lead to a late fee and a much larger reduction in your credit score than just a hard inquiry. 401k loans are much more lenient with repayment and provide plenty of notices.
Other considerations when it comes to Kashable is how easy it is to get in touch with someone that works there if you have a problem. They are not a local company, as their headquarters are in New Jersey. I would highly encourage you to read reviews from different sources so that you understand some of these "unforseen" pitfalls a little better.
As for Purchasing Power, I don't believe there's a hard inquiry to originate the loan. However, a lot of prices they offer are 50% higher or more than what you'd pay if you had bought the product somewhere else (especially on sale, with a coupon code, used from Marketplace, etc.). That is the reason that they're offering you a "0% loan", because they're charging you the interest upfront. May not be a terrible idea for someone in need... but at the same time, it would be wise to develop a savings plan instead of getting loans for things that you don't need and can even potentially hurt your credit score, causing you to get higher interest rates later in life.
And my last note... while it might seem like taking a 401k loan is NOT helping your long-term savings, taking a 401k loan out today for 9.5% interest is NO different than getting a 9.5% loan and, at the same time, watching your 401k balance grow at a guaranteed 9.5% rate. The market rate seen by your 401k could be better than 9.5%, but it could even drop negative (as it has done more than once over the past 3 or 4 years). Taking a 401k loan out BEFORE such a drop would be the most ideal time to start a 401k loan, but of course we cannot possibly know what the true market rate will be in the future. This loan calculator that is linked to on our Links & Resources page only somewhat proves my point. That calculator actually misses the extra gains you would see if you got a 401k loan out right before the market were to drop 10%, for example.
We're all adults, but many people tend to skip over the fine print. Whatever you choose to do, PLEASE make sure you do your due diligence in researching and understanding the terms and payment plan you are agreeing to so that you don't get caught missing a payment, which your employer won't be able to help you with. These are contracts between you and Kashable or Purchasing Power, not your employer. You can take a sneak peak at the terms (without your custom interest rates & payment plan) on our Docs & Forms page.
In solidarity,
Jason "Vito" Vitosky
Business Manager
IBEW Local 733
