It doesn’t affect your credit score. Your 403(b) loan is technically not a debt, so it doesn’t affect your credit score and your chances of getting approved for a traditional loan.
You don’t have to return early withdrawal. If you cash out on your retirement savings, you don’t have to return the money to your account.
You’re taxed twice essentially. Your loan repayment comes from your after-tax income, and then you pay full income tax when you get your distributions.
You pay penalties and taxes when you default. If you default on the loan, you have to pay a 10 percent penalty plus income tax on your entire loan amount. Your early withdrawal is also considered an income and is therefore taxable.
