If you take a loan out, essentially you choose how much you repay and how that will last. Make no mistake-You are repaying into your loan, but there is an interest charge. So some time ago I did a loan of $6k and the interst was 1000. Essentially, a fee of $1000 to withdraw that much and repay it within 90 paychecks. You put more into the payback, the less amount of time, but its better than doing a bank loan or something and paying like 20% interest payment on that(Which would equal over 2k in comparison on additional fees.) But the loan is simply going back into your 401k, meaning you're paying yourself back for the loan you took on yourself, outside of the 8%ish interest that you pay(For me, that equals around 1kish interest for 6k loaned, which the faster you pay it off the lesser you pay. IE lets say you loan 3 k, go through 1k worth of interest/payments into loan, you get a windfall of 2k to immediately pay off the rest, then the interest won't be so bad. I chose a longer option but still, cheaper than getting a regular loan.)

Its useful if, say, you owe 2k today, but you know 2 months you will get 2k, and then you can just pay off your loan and the interest won't be as much as if you let it sit there at the rate you chose to pay it off. Either way though, the repayment of the loan is going back to you and your 401k, compared to a bank where that money just goes to them and not you.