So about a year and a half ago I took a $7,000 loan from my 401k account to pay for a new heating/AC system for our house, as it stands now I've got my balance down to $4,000. Now the IRS steps in and audits the financial firm that controls my 401k and the IRS says that I was given $2,000 too much and I need to pay that back asap. I've already paid $3,000 so from my point of view that $2,000 has already been paid but apparently that doesn't count so they've given me 2 options, pay that $2k now or risk defaulting on the loan OR the financial group is offering to make me another loan for the $4,000 I still owe, have the same amount taken out of my check each week and have it paid off the same time. Giving me a loan to pay off another loan? WTF Why bother with another loan and just keep it the way it is? I thought it was the craziest thing I've heard because being this is a loan from my 401k means I'm loaning myself to begin with. I could just give them the $2,000 and knock my outstanding balance down to $2,000 but that would be a big hit for our savings account. It makes absolutely no sense at all but it all boils down to getting their paperwork in order to please the IRS. I'm one of the lucky ones I guess because there are other guys in the shop who took a loan on their 401k as well but they're not being offered another loan like I am and instead have to pay what ever it is they still owe right now.