That is a decision only you can make ... but here are the facts to consider :
> the amount of interest you are paying each year
> the federal taxes you will pay on the deemed distribution
> the 10% penalty you will need to pay
> the equity you would lose in the 401K and the earnings
Say you have a $20K loan that is only costing you 10% interest the loan will cost you about $2000 but you will have put the $20K back in the retirement account and it increased in value over the years so you will still have more than $20K in the end. But if you default on that same $20K it could cost you 20% or more in taxes/penalties which could be $4000 or more and you will have nothing in the 401K.
