How much can I borrow from my 401(k)?

You can typically borrow up to 50% of your vested 401(k) balance or $50,000, whichever is less. Some plans may have a minimum loan amount of $1,000.

What is the interest rate on a 401(k) loan?

The interest rate on a 401(k) loan is typically the prime rate plus 1% (around 8-10%). The good news is that the interest you pay goes back into your own 401(k) account.

How long do I have to repay a 401(k) loan?

Most 401(k) loans must be repaid within 5 years. However, if you use the loan to purchase your primary residence, you may have up to 15 years to repay.

What happens if I leave my job with an outstanding 401(k) loan?

If you leave your job, you typically must repay the full loan balance within 60-90 days. If you cannot repay, the outstanding balance is treated as a distribution, subject to income taxes and potentially a 10% early withdrawal penalty if you are under 59½.

401(k) Loan Calculator

Calculate your 401(k) loan payments, true cost including lost investment growth, and impact on your retirement savings.

Your 401(k) Account

Current 401(k) Balance

Your vested account balance

Loan Amount

Amount you want to borrow

IRS Loan Limits

Maximum: 50% of vested balance or $50,000 (whichever is less)
Minimum: Usually $1,000

Your Maximum Loan Amount

$50,000

Loan Terms

Interest Rate

Typically Prime + 1% (paid to yourself)

Loan Term Standard max 5 years, or 15 for home purchase

Expected Investment Return

Average annual return if money stayed invested

Loan Analysis Results

Monthly Payment

Deducted from paycheck

Total Repayment

Principal + Interest

Interest Paid (To Yourself)

Goes back to your 401(k)

Lost Investment Growth

Opportunity cost

True Cost of Your 401(k) Loan

Interest Paid

+$0

Lost Growth

-$0

Net Cost

Take Loan vs Keep Invested

Scenario	Take 401(k) Loan	Keep Invested
Starting Balance	$0	$0
Amount Borrowed/Invested	$0	$0
Interest Earned/Paid	$0	$0
Balance After Loan Term	$0	$0
Difference	$0

Job Loss Risk

If you leave your job, the full balance is typically due within 60-90 days. Unpaid amounts become taxable distributions with potential 10% penalty if under 59½.

Double Taxation

Loan repayments are made with after-tax dollars, but will be taxed again when withdrawn in retirement. The interest portion is effectively taxed twice.

Payment Schedule

Month	Payment	Principal	Interest	Balance

Understanding 401(k) Loans

A 401(k) loan allows you to borrow money from your retirement savings. While it may seem attractive because you're "paying interest to yourself," there are significant hidden costs that can impact your retirement.

How 401(k) Loans Work

You borrow up to 50% of your vested balance (max $50,000)
Interest rate is typically Prime + 1%
Repayment through payroll deductions (usually 5 years max)
Interest paid goes back into your 401(k) account

The Hidden Cost: Lost Investment Growth

The biggest cost of a 401(k) loan isn't the interest—it's the investment growth you miss while the money is out of your account. Even though you pay interest to yourself, your borrowed funds miss out on potential market gains, which can significantly impact your retirement savings over time.

When a 401(k) Loan Might Make Sense

Avoiding high-interest debt (credit cards, payday loans)
Short-term emergency with quick repayment ability
Stable job with low risk of leaving
No other low-cost borrowing options available

Alternatives to Consider

Emergency Fund: Build 3-6 months of expenses for emergencies
HELOC: Home equity line of credit (often lower rates)
Personal Loan: May have comparable rates without retirement impact
0% APR Credit Card: For short-term needs with disciplined repayment

Borrowing From Your Future