Home›Money›Should I take a 401(k) loan?

Money tools

Should I take a 401(k) loan?

A 401(k) loan pays its interest back into your own account, so the rate is not the real cost. The cost is the growth the money misses while it is out, and the risk of a tax bill if you leave your job before it is repaid. See both, and how it compares with borrowing elsewhere.

The loan

$
$
%

Your plan sets it; often prime plus 1 or 2.

yrs

Up to 5 years.

Your account

%

A year, on what the money is invested in now.

Some people cut contributions to afford the repayments; ask your plan whether it restricts them during a loan.

Borrowing elsewhere instead

%
yrs
%
yrs
%
yrs

Leave any blank to skip it. A card here means paying it down on a fixed schedule.

If you leave your job

🧮

Enter the amount, your vested balance, the plan's rate and the term.

Rules to know

Your plan may not offer loans. Plans can, but do not have to; check the Summary Plan Description or ask the plan administrator. IRAs cannot lend at all.

The limit. Half your vested balance or $50,000, whichever is less. If half your balance is under $10,000 your plan may let you borrow up to $10,000, but it does not have to. Earlier loans in the past year can lower the limit.

Repaying. Generally within 5 years, with payments at least quarterly, usually through payroll. A loan to buy your main home can run longer. Repayments come out of take-home pay, because they are not plan contributions.

Missing payments turns the unpaid balance into a taxable distribution, which may also carry the 10% additional tax.

Save or send these numbersEmail

All four happen in your browser. Your figures are not sent anywhere — the email opens in your own mail app, already filled in.

Why the rate is not the cost, and what a job change doesA written guide to the rules behind this calculator →
For educational purposes only and not tax advice. Your plan sets whether it offers loans, its rate, its limits and what happens when you leave. Growth assumes a steady return, which investments do not deliver. Tax on a distribution uses the same federal brackets, standard deduction and flat state rate as the early withdrawal calculator.