Borrowing against 401K- is it dumb?

Well - I have already done it but I am considering my options to fix this mistake. Scenario - Borrowed the money to make a 20% down payment on a house a year ago. I currently owe 33,000 back to the 401k (originally borrowed 42,000). I am paying this at 9.5%. This is interest that I am paying back to... show more Well - I have already done it but I am considering my options to fix this mistake.

Scenario -
Borrowed the money to make a 20% down payment on a house a year ago. I currently owe 33,000 back to the 401k (originally borrowed 42,000). I am paying this at 9.5%. This is interest that I am paying back to myself.

Would it be better to open a credit line at basically prime (have offers from several lenders) with no fees. Call prime 8.25%. Now this would be tax deductible. So what is that an effective rate of 6%?

This is where I get stuck. What's the better option? Borrow on a credit line and pay off the 401k loan or let it stay as is? Help...
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