Okay, sure if you are trying to avoid an end-of-the-world situation like foreclosure or bankruptcy and being homeless.... then I agree with you.
Here's the catch. I'm assuming that if you are facing that situation, it means you lost your job. If you lost your job, your 401k loan becomes due in full. So you can't borrow from your 401k to avoid those things if you lost your job, because your loan is due in full if you lose your job.
But short of those catastrophic problems, then borrowing from your 401k is absolutely stupid.
The whole point, the whole entire point of an investment, is to have your money work for you.
If you are "paying yourself interest", then you are working for your money. That defeats the entire purpose.
That's like buying a rental property..... renting it out to yourself.... and saying "I'm not paying a landlord rent! I'm paying myself rent!". Does that seem dumb?
"I'm not paying the bank interest! I'm paying myself interest!".... same thing.
The whole entire point, is you are not paying your stocks... but your stocks are paying you. You are investing in Microsoft, not so you and pay yourself, but so that Microsoft pays YOU.
The whole reason you invest in a mutual fund, is not so you can pay back your mutual fund with interest, but so that your mutual fund works and produces value TO YOU.
Here's a small fund I have. See that I got dividends and I got a capital gain. That money that my investments earned ME.
If I borrow from my 401k, instead of them paying me, now I'm paying myself. I wouldn't get $1,150 from my money working for me, instead I'd be working for my own money.
Borrowing from your investments, is really dumb. Yes, if you are facing catastrophe I get it, but otherwise, it's really stupid. No one should ever say "I'm paying myself interest" because that's idiotic. Defeats the whole purpose of investing.
