Can I borrow against my IRA to pay off debt or pay for a car?
No. Borrowing is not allowed, but if you take a withdrawal, you have 60 days to deposit into another IRA account. This effectively creates a 60 day loan. Not what you're really looking for.  If you take this withdrawal and re-deposit to new account within 60 days, no problem. If not, you owe tax on the untaxed amount as well as a 10% penalty. This comes from IRS' Publication 590, I have the document memorized by substance, not page number.
I wouldn't give it a second thought. I'd get rid of the extra car and do everything I could in the following months to repay the emergency fund. Even without the interest payments, I'd consider getting rid of an unused car due to the very nature of a car being a depreciating asset that has insurance expenses and annual registration fees on top of that depreciation. The one exception to the above would be a classic car that was purchased for an investment that is always garaged and doesn't need to be registered for road use. I take it for granted that most people who can afford such investments don't need my advice about when to sell. This is a case where human nature and arithmetic lead to different results. Depending on the your income, the effective interest rate on the mortgage is probably right around 2.5%.  So purely by arithmetic, the absolute cheapest way to go is to put the $11k to the bigger car loan, then pay off the mortgage, then the smaller car loan. The Debt Snowball is more effective however, because it works better for people. Progress is demonstrated quickly, which maintains (and often enhances) motivation to continue.  I can say as a case in point, having tried both methods, that if does indeed work.  So, I am with you ... pay off the car loan first, and roll that payment into the bigger car loan. If you add no extra dollars, you should get the small loan paid off in 6 to 8 months and the bigger car loan in another 16 to 18 months. It sounds like from your message that you have another $1500 or so a month.  If that is the case ... small loan paid off in two months, bigger loan paid off in another year.  If you stick with the Ramsay program, you then build an emergency fund and start investing. Good luck! Why would you trade a lower interest rate over a higher one?  I wouldn't use the mortgage to pay off the car.  Also, you should have loan/lease payoff on your auto insurance, which if the car is totaled means your loan would be paid by insurance.  I don't think you'd be able to take advantage of that if your car payments become one with the mortgage.  Finally not all mortgage interest may be deductible. Also, I can't think of any way you'd be able to use the car loan to pay off the mortgage.  You wouldn't be able to borrow more than the car is worth, and for a new car it loses quite a bit of value immediately. I think you're missing several key issues here. First for the facts: IRA contributions are $5500 a year maximum (currently, it changes with inflation), i.e.: you cannot deposit $10K in an IRA account in a single year. IRA withdrawals can only be made if you have something liquid in the IRA. You cannot withdraw from Lending Club IRA unless you manage to sell the notes currently held by you there. Roth IRA is funded with after-tax money, and you can withdraw your deposits in Roth IRA any time for any reason. No 10K limit there, only limited by what you deposited. However the main thing you're missing is this: You can withdraw up to $10K from your IRA for first home purchase without penalty. Pay attention: not without tax but without penalty. So what is the point in depositing $10k into IRA just to withdraw it the next year? "You have several questions in your post so I'll deal with them individually: Is taking small sums from your IRA really that detrimental? I mean as far as tax is concerned? Percentage wise, you pay the tax on the amount plus a 10% penalty, plus the opportunity cost of the gains that the money would have gotten.  At 6% growth annually, in 5 years that's more than a 34% loss.  There are much cheaper ways to get funds than tapping your IRA. Isn't the 10% ""penalty"" really to cover SS and the medicare tax that you did not pay before putting money into your retirement? No - you still pay SS and medicare on your gross income - 401(k) contributions just reduce how much you pay in income tax.  The 10% penalty is to dissuade you from using retirement money before you retire. If I ... contributed that to my IRA before taxes (including SS and medicare tax) that money would gain 6% interest. Again, you would still pay SS and Medicare, and like you say there's no guarantee that you'll earn 6% on your money.  I don't think you can pay taxes up front when making an early withdrawal from an IRA can you?  This one you got right.  When you file your taxes, your IRA contributions for the year are totaled up and are deducted from your gross income for tax purposes. There's no tax effect when you make the contribution. Would it not be better to contribute that $5500 to my IRA and if I didn't need it, great, let it grow but if I did need it toward the end of the year, do an early withdrawal? So what do you plan your tax withholdings against?  Do you plan on keeping it there (reducing your withholdings) and pay a big tax bill (plus possibly penalties) if you ""need it""?  Or do you plan to take it out and have a big refund when you file your taxes? You might be better off saving that up in a savings account during the year, and if at the end of the year you didn't use it, then make an IRA contribution, which will lower the taxes you pay.  Don't use your IRA as a ""hopeful"" savings account. So if I needed to withdrawal $5500 and I am in the 25% tax bracket, I would owe the government $1925 in taxes+ 10% penalty. So if I withdrew $7425 to cover the tax and penalty, I would then be taxed $2600 (an additional $675). Sounds like a cat chasing it's tail trying to cover the tax. Yes if you take a withdrawal to pay the taxes. If you pay the tax with non-retirement money then the cycle stops. how can I make a withdrawal from an IRA without having to pay tax on tax. Pay cash for the tax and penalty rather then taking another withdrawal to pay the tax.  If you can't afford the tax and penalty in cash, then don't withdraw at all. based on this year's W-2 form, I had an accountant do my taxes and the $27K loan was added as earned income then in another block there was the $2700 amount for the penalty. So you paid 25% in income tax for the earned income and an additional 10% penalty.  So in your case it was a 35% overall ""tax"" instead of the 40% rule of thumb (since many people are in 28% and 35% tax brackets) The bottom line is it sounds like you are completely unorganized and have absolutely no margin to cover any unexpected expenses.  I would stop contributing to retirement today until you can get control of your spending, get on a budget, and stop trying to use your IRA as a piggy bank.  If you don't plan on using the money for retirement then don't put it in an IRA.  Stop borrowing from it and getting into further binds that force you to make bad financial decisions. You don't go into detail about any other aspects (mortgage? car loans? consumer debt?) to even begin to know where the real problem is.  So you need to write everything down that you own and you owe, write out your monthly expenses and income, and figure out what you can cut if needed in order to build up some cash savings. Until then, you're driving across country in a car with no tires, worrying about which highway will give you the best gas mileage." Have you considered a self-directed IRA to invest, rather than the stock market or publicly traded assets? Your IRA can actually own direct title to real estate, loan money via secured or unsecured promissory notes much like a hard money loan or invest into shares of an entity that invests in real estate. The only nuance is that the IRA holder is responsible for finding and deciding upon the investment vehicle.  Just an option outside of the normal parameters, if you have an existing IRA or old 401(k) or other qualified plan, this might be an option for you. There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur.  If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems. Does your current employer offer a 401(k)? Can you roll your IRA into that? You can borrow from a 401(k). If you leave your job, get fired etc., you have to pay back the loan but you can avoid the early withdrawal penalty at least; there may also be  less of a tax issue since it is a loan and may not be considered income unless you don't pay it back. The terms for  taking a loan are set by the 401(k) plan  documents. If you explore this route make sure you see the plan document itself. Don't rely on what someone tells you. "Seems to me you don't have a ton of great choices, but of them: Keep going as you are.  If/when the car becomes unusable without significant expenses, stop using it.  Buy another junker and use that to get by until your loan is paid off.  From now until then, put aside a few hundred (or whatever you can, if more) each month towards the anticipated purchase.  When you do buy this junker, pay in cash - no loan.  Just get something that will take you to work, and that includes ""bike"" if that's a possibility.  When you can, sell the no longer usable car to finish paying off the loan. Start aggressively paying off the current loan, with the eye of getting it down to where you're not underwater anymore.  Then sell the car and dispose of the loan, and buy a better replacement.  Scrimp and save and cut everything - eat cheaply (and never out), cut your personal expenses everywhere you can.  If you get another $250 a month towards principal, you can probably be no-longer-underwater in about a year. Get a personal loan today for the amount that you're underwater, and immediately sell the car.  This gets you out of the loan and car the quickest, and if you think the car will devalue significantly between now and when you might be not underwater anymore, this might be the best option.  But it's the most expensive, likely - you'll pay 12% to 20% on the difference.  Now, 12% of $5000 is less than 5% of 15000, so it might actually be a good financial deal - but you'll probably have to shop around to get 12-15% with a 660 (though it's probably possible).  You'll still be without a car at this point, though, so you'd have to buy another one (or live without for a while), and you'd still have a payment of some sort, but perhaps a more manageable one ($5000 @ 12% @ 5 years means something a bit over $100 a month, for example.) I recommend that if you can get by without a car for a while, option 2 is your best bet.  All of these will require some financial care for a while, and probably cutting back on expenses for a year or two; but realistically, you shouldn't expect anything else.  Get a budgeting app if it will help see how to do this. As far as getting out of the loan without paying it, I don't recommend that at all.  Your credit will be ruined for at least seven years, and 660 is not bad at all really, and then would take  yet more years to recover.  You will likely be sued for the balance plus collection costs, beyond repossession.  The consequences would be far, far worse than just paying it off, and I mean that financially as well as ethically." This advice will be too specific, but... With the non-retirement funds, start by paying off the car loan if it's more than ~3% interest rate. The remainder: looks like a good emergency fund. If you don't have one of those yet, you do now. Store it in the best interest-bearing savings account you can find (probably accessible by online banking). If you wish to grow your emergency fund beyond $14-20,000 you might also consider some bonds, to boost your returns and add a little risk (but not nearly as much risk as stocks). With the Roth IRA - first of all, toss the precious metals. Precious metals are a crisis hedge and an advanced speculative instrument, not a beginner's investment strategy for 40% of the portfolio. You're either going to use this money for retirement, or your down payment fund. If it's retirement: you're 28; even with a kid on the way, you can afford to take risks in the retirement portfolio. Put it in either a targe-date fund or a series of index funds with an asset allocation suggested by an asset-allocation-suggestion calculator. You should probably have north of 80% stocks if it's money for retirement. If you're starting a down-payment fund, or want to save for something similar, or if you want to treat the IRA money like it's a down-payment fund, either use one of these Vanguard LifeStrategy funds or something that's structured to do the same sort of thing. I'm throwing Vanguard links at you because they have the funds with the low expense ratios. You can use Vanguard at your discretion if it's all an IRA (and not a 401(k)). Feel free to use an alternative, but watch the expense ratios lest they consume up to half your returns. Your brokerage might be cautious about allowing you to loan your IRA money in a Peer-to-Peer lending deal because it might result in a prohibited transaction (e.g. the other Peer is your son-in-law; for the purposes of IRAs, the spouse of a lineal descendant is treated the same as you, and the transaction will be treated as if you have borrowed money from your IRA). If you want to put the money into a lending club, then there might be issues of how the club is structured, e.g. who makes the decisions as to whom the money is loaned to. Such issues don't arise if you are putting the money into a money-market mutual fund, for example, but with new-fangled institutions such as lending clubs, your brokerage might just being cautious. If you want to open an IRA account directly with a lending club, check if the club offers IRA accounts at all. For this, they will likely need to have a custodian company that will handle all the IRA paperwork. For example, the custodian of IRA accounts in Vanguard mutual funds is not the fund or even Vanguard itself but a separate company named Vanguard Fiduciary Trust Company. I am sure other large firms have similar set-ups. Whether your pet Peer-to-Peer lending club has something similar set up already is something you should look into. This part of the answer applies to an earlier version of the question in which the OP said that he wanted to invest in precious metals. Be careful in what you invest in when you say you want to invest in precious metals; in refusing to buy precious metals for you in your IRA, your brokerage (as your fiduciary) might be refusing to engage in  a prohibited transaction on your behalf. Investments in what are called collectibles are deemed to have been distributed to you by the IRA, and if this is an early distribution, then penalties also apply in addition to the income tax.  Publication 590 says Collectibles. These include:  Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. So, make sure that your new IRA custodian does allow you to buy (say) titanium or Krugerrands in your IRA if that is your pleasure. The key thing to consider in a question like this is, What return am I getting on my investment versus what interest am I paying on the loan? If the investment returns more than what you're paying on the loan, than it makes sense to keep the investment and pay off the loan with other income. If the investment returns less, than it makes sense to cash it out to pay off the loan. One complicating factor is taxes. In the case of an IRA, you're not paying taxes on the profits. You do pay a tax penalty for an early withdrawal. Those are both factors that tend to make keeping the money in the IRA more desirable. And of course, if the choice is between keeping your investment and defaulting on the loan, you probably want to close out the investment. I don't know what return you're getting on your IRA, but it's probably more than 6.8%. I'd have to check but I think my retirement funds got over 20% last year. If you're not getting 6.8%, you might want to investigate switching to another investment fund. I'm sure there's a lot I don't know about your situation, but I'd think that keeping the IRA would be a better plan. If you can't add to it for some time well you get these debts paid off, well, that's how it is. "While I can appreciate you're coming from a strongly held philosophy, I disagree strongly with it.  I do not have any 401k or IRA I don't like that you need to rely on government and keep the money there forever. A 401k and an IRA allows you to work within the IRS rules to allow your gains to grow tax free. Additionally, traditional 401ks and IRAs allow you to deduct income from your taxes, meaning you pay less taxes. Missing out on these benefits because the rules that established them were created by the IRS is very very misguided. Do you refuse to drive a car because you philosophically disagree with speed limits?  I am planning on spending 20k on a new car (paying cash) Paying cash for a new car when you can very likely finance it for under 2% means you are loosing the opportunity to invest that money which can conservatively expect 4% returns annually if invested. Additionally, using dealership financing can often be additional leverage to negotiate a lower purchase price.  If for some reason, you have bad credit or are unable to secure a loan for under 4%, paying cash might be reasonable.  The best thing you have going for you is your low monthly expenses. That is commendable.  If early retirement is your goal, you should consider housing expenses as a part of your overall plan, but I would strongly suggest you start investing that money in stocks instead of a single house, especially when you can rent for such a low rate. A 3 fund portfolio is a classic and simple way to get a diverse portfolio that should see returns in good years and stability in bad years. You can read more about them here: http://www.bogleheads.org/wiki/Three-fund_portfolio You should never invest in individual stocks. People make lots of money to professionally guess what stocks will do better than others, and they are still very often wrong. You should purchase what are sometimes called ""stocks"" but are really very large funds that contain an assortment of stocks blended together. You should also purchase ""bonds"", which again are not individual bonds, but a blend of the entire bond market.  If you want to be very aggressive in your portfolio, go with 100-80% Stocks, the remainder in Bonds. If you are nearing retirement, you should be the inverse, 100-80% bonds, the remainder stocks.  The rule of thumb is that you need 25 times your yearly expenses (including taxes, but minus pension or social security income) invested before you can retire. Since you'll be retiring before age 65, you wont be getting social security, and will need to provide your own health insurance." I think Joe is right, it seems that you will get the car once grandpa passes.  It clearly states that on the DMV page. I would work like crazy to get this car paid off ASAP.  Work extra and see if you can get it paid off in less than a year.  Once paid off, have grandpa sign it over to you.   This is a really toxic situation that you can reduce somewhat by having the car in your name only.  Learn from this:  have a will and keep it up to date.  There is going to be a lot of fighting over the assets that grandpa leaves behind.  You don't want that to be your legacy, and you don't want to tarnish your grandfathers memory by participating in such nonsense. My concern is why you have such poor credit.  Understand that poor credit is a choice of behavior and there is no one to blame but yourself.  I would recommend to stop borrowing completely until this car is paid off and all of your obligations are paid back (that is if you have items that are in collections).  No vacations, no eating out, etc... Work don't spend. You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it!