Core Insights - The research indicates that 401(k) loans are primarily used for essential needs, particularly medical and housing expenses, rather than for discretionary spending [1][5]. Group 1: Research Findings - The study conducted by the Employee Benefit Research Institute and J.P. Morgan Asset Management analyzed the spending behavior of private-sector 401(k) participants, revealing that healthcare and housing are the main reasons for borrowing [2]. - Nearly half (47.6%) of households that took a loan experienced a healthcare spending increase of over 10% that year, with healthcare being the only category where spending rose significantly for borrowers compared to non-borrowers [3]. - There is a notable correlation between taking a plan loan and starting mortgage payments, with 12.5% of households making mortgage payments having taken a loan compared to 9.6% who did not [4]. Group 2: Implications of Findings - Researchers argue that restricting access to 401(k) loans could worsen financial security, as participants may resort to outside loans with less favorable terms, leading to greater long-term financial harm [5]. - Financial advisors express concerns about treating 401(k) accounts as general savings, warning of potential tax implications and performance drag due to opportunity costs associated with loans [6][8].

Core Insights - Home equity lines of credit (HELOCs) are valuable for debt consolidation and home repairs, but the amount one can borrow depends on individual financial circumstances and lender criteria [1] Borrowing Capacity - The borrowing amount from a HELOC is determined by the combined loan-to-value (CLTV) ratio, which compares the total debt on the property to its market value. Most lenders allow borrowing between 80% and 85% of the home's value minus any existing mortgage balance [2][9] - For example, if a home is valued at $350,000 with a mortgage balance of $100,000, and the lender allows borrowing up to 85%, the potential borrowing amount would be $197,500 [3][4] Factors Influencing HELOC Approval - Lenders consider several factors beyond the CLTV ratio, including: - The appraised value of the home, which directly affects equity and borrowing potential [6] - The debt-to-income (DTI) ratio, with a typical requirement of no more than 40% to 50% [6] - The borrower's credit score, which influences the interest rate and borrowing limits [6] - The borrower's income stability and amount, which assures lenders of repayment capability [6] Lender-Specific Limits - Different lenders have maximum borrowing limits for HELOCs; for instance, PenFed Credit Union has a maximum limit of $500,000 [7] Alternatives to HELOCs - If qualifying for a HELOC is a concern, there are alternative financing options available, such as home equity loans, reverse mortgages, cash-out refinancing, home equity sharing agreements, 401(k) loans, and personal loans [8][13]