Estimate how much you may be able to borrow from your 401(k), your repayment amount, total interest, payoff schedule and how borrowing could affect the value of your retirement account over time.
The calculator can also account for existing plan loans and the IRS prior-12-month loan-balance rule.
✓ IRS loan-limit rules modeled✓ Full amortization schedule✓ Retirement-account impact comparison✓ Free — no signup required
Plan Disclosure: Your 401(k) plan is not required to offer participant loans and may impose limits or terms that are stricter than federal maximums. Confirm your plan's loan policy or Summary Plan Description before relying on the estimate.
1. Calculate Your 401(k) Loan
Determine statutory borrowing limits under IRC § 72(p) rules.
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Use your vested account balance, not necessarily your total displayed 401(k) balance. Unvested employer contributions generally should not be included when determining the statutory participant-loan limit.
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✓ Within estimated limit
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Include applicable outstanding participant loans from plans of the employer or related employer where required for the loan-limit calculation.
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Federal loan-limit rules can reduce the $50,000 ceiling when you had a higher outstanding loan balance during the one-year period ending the day before the new loan. Check your plan loan history or ask your administrator.
Federal rules permit a plan to allow up to $10,000 when 50% of the vested benefit is lower, but plans are not required to provide this exception.
2. Loan Terms & Repayment Settings
Set interest rate, repayment term, and payroll frequency.
Federal law provides an exception from the normal 5-year requirement for purchasing a principal residence, but permitted terms are plan-specific. It does not apply to second homes, renovations, or repairs.
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Example assumption — replace with your plan's quoted rate. Federal rules require participant loans to bear a reasonable rate of interest, but there is no universal statutory rate.
A qualifying participant loan generally must use substantially level payments made at least quarterly.
Optional Fees & Paycheck Affordability
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Used to calculate the percentage of your paycheck the loan payment will consume.
Estimated Maximum New 401(k) Loan
IRC § 72(p) Statutory Formula
$50,000
Vested 401(k) balance$100,000
Vested-side limit (50% or $10k rule)$50,000
Base federal dollar ceiling$50,000
Prior-12-month loan adjustment (H - C)-$0
Current outstanding plan-loan balance-$0
Estimated Maximum New Loan$50,000
Estimated Loan Payment
Level amortization based on selected loan amount and frequency.
$232.55per biweekly
Total Repayment$30,231
Total Scheduled Interest$5,231
Number of Payments130 payments
Plan Fees Paid$0
Share of Entered Paycheck—
This uses a standard amortizing-loan model. Your plan's actual payroll rounding, fees, and exact deduction dates can produce small differences.
401(k) Loan Repayment Schedule
Full level-payment amortization table detailing principal reduction and interest.
Payment #
Beginning Balance
Payment
Principal
Interest
Ending Balance
How Could the Loan Affect Your 401(k) Balance?
Unlike simple calculators that assume all borrowed funds are permanently lost, this engine models repayments re-entering your account over time and participating in compound market growth thereafter.
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Will you continue normal 401(k) contributions while repaying the loan?
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Scenario A — No Loan$761,226Full balance remains invested in market assets compounding until retirement.
Scenario B — With 401(k) Loan$745,820Principal removed, repayments restore balance over time, then compound to retirement.
Projected Balance Difference-$15,406Estimated difference in final account value under these entered assumptions.
Projected Account Value Over Time
Cash-Flow Fairness Principle
Remember that 401(k) loan interest repayments are funded from your household cash flow / take-home paycheck, not from an outside investment bonus. While your retirement account receives the interest, this represents your own money returned to the plan rather than "free profit."
What If I Leave My Job Before the Loan Is Repaid?
Calculate outstanding principal balance at separation and understand tax rules.
26 of 130
Estimated Loan Balance at Separation
$20,765
Outstanding principal according to amortization schedule.
Estimated Tax & Penalty If Not Rolled Over
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Depends on tax brackets and rollover status.
IRC § 72(p) Failure
Deemed Distribution
⚠️ Occurs when required loan payments are missed and not corrected within the plan cure period.
⚠️ Reported on Form 1099-R Code L.
⚠️ Subject to ordinary federal and state income tax, plus potential 10% early distribution penalty.
🚫NOT rollover eligible: You cannot roll a deemed distribution into an IRA or another plan.
📌 You may remain legally obligated under plan terms to repay the loan note.
Actual Distribution
Plan Loan Offset & QPLO
✓ Occurs when the plan reduces your account balance to accelerate and satisfy the debt (common upon job change).
✓ Treated as an actual distribution: Eligible for rollover!
⏱️Qualified Plan Loan Offset (QPLO): When caused by severance from employment or plan termination, rollover window extends to your federal tax return due date (plus extensions) for that tax year.
⏱️ Ordinary non-QPLO offsets have the standard 60-day rollover window.
💡 You must use external funds to complete the rollover to an IRA, as no cash is distributed.
How 401(k) Participant Loans Work: Complete Legal & Financial Guide
Detailed answers to statutory limits, tax rules, repayment terms, and borrowing considerations.
How Is the Maximum 401(k) Loan Calculated?
The statutory maximum 401(k) loan is generally the lesser of 50% of your vested account balance or $50,000, reduced by your highest outstanding loan balance during the previous 12 months.
Under Internal Revenue Code § 72(p)(2), the calculation requires evaluating both an account-equity limit and an aggregate dollar ceiling:
Vested Account Balance: Only vested dollars count. If you have $100,000 displayed in your account but $20,000 represents unvested employer matching contributions, your vested balance for loan purposes is $80,000. 50% of this balance equals $40,000.
Adjusted $50,000 Ceiling: The statutory $50,000 cap is reduced by the excess of your highest outstanding plan loan balance in the prior 12 months over your current outstanding balance: Reduction = max(0, Highest_Prior_12M - Current_Balance).
Current Balance Offset: Any existing active loan balance reduces your remaining new borrowing capacity dollar-for-dollar.
Individual employer plans are not required by law to offer loans, and those that do may enforce lower dollar caps (e.g., $30,000 max), establish loan minimums (commonly $1,000), or limit participants to a single active loan at any time.
What If 50% of My Vested Balance Is Less Than $10,000?
Federal law permits qualified retirement plans to allow loans up to $10,000 even if 50% of the vested balance is lower, but employers are not required to adopt this exception.
Under IRC § 72(p)(2)(A)(ii), a plan document may include a special de minimis provision allowing participants with modest account balances to borrow up to $10,000 (or their total vested balance, whichever is less). For example, if you have $15,000 vested:
Standard 50% Rule: Limits your loan to $7,500.
With Optional $10,000 Exception: Your plan allows you to borrow up to $10,000.
If Vested Balance Is $6,000: Even with the exception, you cannot borrow more than your actual vested balance ($6,000).
Because many plan administrators avoid the administrative burden and default risk of small loans, you should confirm with your plan administrator whether this optional rule is written into your plan agreement.
How Long Do You Have to Repay a 401(k) Loan?
A general-purpose 401(k) loan must be repaid within a maximum term of five years under IRC § 72(p)(2)(B), with payments made at least quarterly in substantially level installments.
The only statutory exception to the five-year repayment rule applies to loans used to acquire a dwelling unit that is to be used within a reasonable time as the principal residence of the participant.
Critical Principal Residence Distinction
Federal law provides relief from the five-year cap exclusively for purchasing your primary home. It does NOT automatically apply to refinancing an existing mortgage, remodeling, home improvements, vacation cabins, or rental properties. Furthermore, the actual term offered (e.g., 10, 15, or 20 years) is established entirely by your employer's plan document.
Where Does the 401(k) Loan Interest Go? Does It Hurt Growth?
All interest paid on a 401(k) loan is credited directly back into your own retirement account; however, borrowing can still hinder wealth accumulation due to lost investment growth and take-home cash flow drag.
When you borrow from your 401(k), the plan liquidates an equivalent amount of investments to generate the cash for your loan. During the repayment term:
Missing Market Gains: If the stock market appreciates by 10% annually while your loan charges 8%, the unreturned balance experiences an opportunity drag of 2% per year.
Repayments Re-Enter Over Time: As you make each scheduled payroll payment, principal and interest re-enter the account and immediately begin participating in market compounding.
Household Cash Flow Reality: Interest is not "free money" or "bonus return" because you must fund every repayment dollar out of your current post-tax paycheck.
Contribution Pause Risk: The greatest long-term cost occurs if loan repayments force you to reduce or stop your regular salary deferrals, particularly if you forfeit employer matching contributions.
401(k) Loan vs. Early Withdrawal Comparison
A 401(k) loan avoids upfront taxes and penalties if repaid according to terms, whereas an early withdrawal permanently liquidates retirement assets and triggers immediate tax and penalty liabilities.
Feature
401(k) Participant Loan
401(k) Early Withdrawal
Current Income Tax
None, as long as loan terms and limits are satisfied
Taxable as ordinary income (Federal & State)
10% Additional Tax
Does not apply while compliant
10% additional tax applies if under age 59½ (unless exception)
Mandatory Withholding
$0 withheld from loan check
20% mandatory federal withholding on eligible rollover cash
Repayment Obligation
Mandatory level payments (payroll deduction)
None; funds are permanently removed
Maximum Amount
Lesser of 50% vested balance or $50,000
Subject to plan distribution / hardship rules
Job Separation Risk
Unpaid balance may be offset; triggers tax unless rolled over
Distribution has already occurred; tax liability is fixed
What Happens to a 401(k) Loan If You Leave Your Job?
If you leave your employer with an outstanding 401(k) loan, your plan may require accelerated repayment or execute a plan loan offset, which qualifies as a Qualified Plan Loan Offset (QPLO) with extended rollover deadlines.
Under the Tax Cuts and Jobs Act (TCJA), when a participant loan offset occurs due to severance from employment or plan termination:
Extended Rollover Window: Instead of the standard 60-day rollover window, participants have until their federal income tax return filing due date (including extensions) for the tax year in which the offset occurred to roll the unpaid loan balance into an IRA or new employer plan.
Avoid Taxes & Penalty: Completing the rollover using external personal funds completely eliminates federal and state income tax, as well as the 10% early distribution penalty.
Deemed Distribution Distinction: If you miss loan installments while still employed and fail to cure the default, the event is treated as a deemed distribution (Form 1099-R Code L). Deemed distributions are never eligible for rollover.
Worked Examples: How the Statutory Limits Apply
Examining three distinct scenarios evaluated by the calculator engine.
Scenario 1
$80,000 Vested Balance (No Prior Loans)
Vested Account Balance:$80,000
50% Equity Limit:$40,000
Base Dollar Ceiling:$50,000
Existing Loan Balance:$0
Maximum New Loan:$40,000
Scenario 2
$120,000 Vested Balance (No Prior Loans)
Vested Account Balance:$120,000
50% Equity Limit:$60,000
Base Dollar Ceiling:$50,000
Existing Loan Balance:$0
Maximum New Loan:$50,000
Scenario 3 — Complex Prior Loan Adjustment
$150,000 Vested Balance with Prior-12-Month Loan History
Participant currently has $20,000 outstanding on an existing loan. In the preceding 12 months, the peak balance was $30,000.
Comprehensive answers based on current IRS and Department of Labor guidance.
Federal rules generally limit participant loans using the lesser of a statutory dollar ceiling and a vested-account-balance limit. Existing or recent plan loans can reduce the amount available for a new loan, and your employer's plan may impose lower limits.
The commonly cited federal ceiling is $50,000, but the actual available amount can be lower because of the 50%-of-vested-balance rule, current loans and prior-12-month loan history.
No. The $50,000 dollar ceiling and prior-loan rules can produce a lower amount, and your plan may impose additional restrictions or limit the number of active loans.
If there are no other limitations or prior-loan adjustments, the federal dollar ceiling limits the loan to $50,000 even though 50% of your vested balance is $100,000.
A plan may be permitted to offer an optional statutory $10,000 exception under IRC § 72(p)(2)(A)(ii), but it is not required to do so. Check your plan's loan policy.
Yes. Current outstanding loans and the highest outstanding balance during the relevant prior one-year period can reduce new-loan capacity.
Federal participant-loan rules under IRC § 72(p)(2)(A)(i) reduce the $50,000 ceiling by the excess of the highest outstanding balance during the prior 12 months over the balance on the date the new loan is made.
General-purpose participant loans generally must be repaid within five years. A qualifying loan used to purchase the participant's principal residence can be allowed a longer term under the plan.
Payments generally must be substantially level and made at least quarterly, typically through automated payroll deduction.
The plan determines the rate subject to applicable requirements, including that participant loans bear a reasonable rate of interest commensurate with commercial lenders.
No. Federal rules require a reasonable rate of interest, but do not impose one universal "Prime + 1%" rate for every plan.
Participant-loan repayments generally restore principal and interest through the retirement-plan account under the plan's terms. Interest should still be viewed together with the lost or gained investment returns and the cash-flow cost of making repayments.
It can. Money borrowed is not invested in market securities while outside the account, although repayments return money over time. The actual difference depends on investment performance, loan rate, payment timing and whether normal contributions continue.
No. A more complete comparison accounts for repayments returning to the retirement account over time. This calculator compares a no-loan scenario with a loan-and-repayment scenario instead of treating the entire loan as permanently removed.
That can further reduce the modeled retirement balance and may also forfeit employer matching contributions. Use the contribution-impact settings to model the difference.
A participant loan that meets applicable requirements generally is not treated as a taxable distribution when made.
A missed payment can lead to default and a deemed distribution if it is not corrected under applicable plan and cure-period rules.
A deemed distribution is a taxable event that can occur when a participant loan fails applicable requirements. It is reported on Form 1099-R Code L, is taxable, and generally is not eligible for rollover.
A plan loan offset occurs when the plan reduces the participant's account balance to repay the unpaid loan. It is treated as an actual distribution and can generally be eligible for rollover.
A QPLO is a qualifying plan loan offset associated with plan termination or severance from employment that meets applicable requirements and can receive an extended rollover deadline through the tax filing due date with extensions.
The result depends on the plan. The plan may require immediate payoff, allow continuing installment payments, or execute an offset. Tax and rollover treatment depends on the specific plan terms.
No. A qualifying plan loan offset (QPLO) associated with severance from employment or plan termination receives an extended rollover period through the federal tax-return due date, including extensions, for the applicable year.
A qualifying loan used to purchase the participant's principal residence can be permitted a longer repayment period. The plan determines the actual term it offers.
The statutory exception specifically concerns purchasing a principal residence. Do not assume ordinary renovations or other home expenses qualify.
No. IRAs and IRA-based plans do not permit participant loans in the same way qualified employer plans can. Borrowing from an IRA is a prohibited transaction.
Neither is universally better. They have different repayment, tax, cash-flow and retirement-growth consequences. Use the Early Withdrawal Calculator to model the distribution side separately.
No. It provides educational calculations based on the assumptions entered and does not recommend borrowing from a retirement plan.
Federal retirement plan rules do not base participant loans on consumer credit scores, and repayments are typically handled via payroll rather than reported to credit bureaus. Check with your plan administrator for their specific loan procedures.
Official Regulatory Sources & Governance
This calculator and guidance are built strictly upon primary statutory authorities and regulatory guidance:
Change the loan amount, term, interest rate, repayment frequency and retirement assumptions to see how each input changes your payment and projected retirement-account impact.