Generally speaking, it’s only smart to borrow money when you need to finance a purchase such as a home or vehicle. You should have an emergency fund to cover unexpected expenses and secure additional income if you’re not able to make ends meet. That said, many people are unprepared for an emergency, and if other sources charge much higher interest rates or you have no other options besides bankruptcy, a 401(k) loan may be a good option. However, you want to pay it back on time so you don’t threaten your retirement savings and future financial stability.