NEW YORK (CNN/Money) - Does it make sense to take a $7,000 loan from my 401(k) to pay off a credit card that charges a 24.99 percent rate? I can't think of a reason this wouldn't be a good idea.

-- Mary Jo McDermott, Tustin, Calif.

I don't think there's much doubt that, given the choice between paying the credit card company 24.99 percent or borrowing from your 401(k) and using the proceeds to pay off your plastic debt, that you're financially better off tapping your 401(k).

But this may not be an either-or situation. Perhaps there are other alternatives you also ought to consider.

First, though, let's look at a 401(k) loan vs. your credit card.

In most cases, you can borrow from your 401(k) at a rate of two percentage points or so above prime, which would mean a rate of about 6 percent these days.

Typically, 401(k) loans must be repaid within five years (although plans can give 10 to 30 years if the loan is to buy a house). So, assuming you borrow $7,000 at 6 percent and repay it over five years, you would be talking about a payment of $135 a month or so.

Your credit card, by contrast, charges that staggering 24.99 percent rate. To repay that seven grand within 60 months at that blimpish rate would require monthly payments of about $205. So, clearly, the 401(k) loan is a better deal than your card.

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This assumes, of course, that your plan allows you to borrow against your account. Roughly 90 percent of plans do allow participants to take loans, but you'll want to know whether your plan is one of those that do.

You'll also want to check the terms of the loan as well. Generally, the loan can't be larger than $50,000 or half the balance in your account, whichever is smaller. Some plans may add a processing fee of $50 to $100 for a loan, and some may also charge quarterly or annual fees to monitor the loan. Employers usually deduct the payments from your paycheck, and funnel those payments right back into your account.

As good a deal as 401(k) loans can be doesn't mean there's no downside to them.

First, you'll be using after-tax dollars to make those interest payments on your 401(k) loan. Those dollars will be taxed again when you withdraw them at retirement. So you'll be taxed twice on the money you use to repay the loan.

You should also know that if you leave your job or are fired while the loan is outstanding, most employers will require that you repay the remaining balance before you depart or soon afterwards, usually within 60 days. If you fail to do that, the outstanding balance will be considered a distribution subject to income tax, plus a 10 percent penalty if you're under age 59 1/2 and not retired.

For these reasons, I recommend you consider other alternatives before turning to your 401(k). One possibility you should definitely look into is a home equity line of credit. The interest rates are usually as low, if not lower, than what you can get on a 401(k), the repayment terms are often more flexible and the interest on a home equity loan is usually tax-deductible, which isn't the case with 401(k) loans.

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Whichever way you go on this, I hope you'll do two things. First, get rid of that high-rate card. With so many banks competing for borrowers these days, you should be able to find a much better deal. You can start your search by clicking here.

And, finally, please, make sure you don't use the clean slate on your credit card balance as an excuse to start charging up a storm again. Otherwise, all this juggling of debt and looking for lower interest rates is like re-arranging deck chairs on the Titanic -- ultimately a pointless exercise.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Monday afternoons.