A loan doesn't have any tax penalty
Bzz, wrong answer. A loan costs more in taxes than just taking the money out. (No early withdraw penalty, though.)
Check my math here. Assume for the sake of argument my marginal income tax rate is 25%. I take $10k out of my IRA. My choices are straight withdraw or loan at 5% APY for one year. How much money do I get, and how much money do I have to put back in to restore the IRA to its original state?
If I take the money out, then I pay 25% in taxes, or $2,500. I then need to put $10k back in to get my $7.5k out, or $1.33 for every $1 I needed.
If I loan out the money, I get $10k. A year passes. My loan balance is now $10.5k. Then I have to repay the loan with *post-tax dollars*. This means I need to earn an extra $14k dollars to get $10.5k after taxes to repay the loan, or $1.40 for every $1 I needed.
Unless it is a matter of life and death, do NOT take a loan out against your IRA. Your IRA is NOT a substitute for saving money against extraordinary needs, to say nothing of ordinary needs.