Finder makes money from featured partners, but editorial opinions are our own. Advertiser Disclosure
401(k) loan calculator
Use this calculator to estimate how much it can cost to borrow from your retirement savings.
The maximum amount on a 401(k) loan is $50,000, or 50% of what you’ve managed to save up. The IRS states that you have five years maximum to repay the loan, and plan for an interest rate a few points above the prime rate. As of September 2022, the prime rate is 5.5%, so 6% or 7% is a good estimate at the time of writing.
Use our calculator to see how much you might pay in interest charges over the course of a 401(k) loan based on the current prime rate, and how much you can or want to borrow. But remember — many consider a 401(k) loan a last resort, and there are many other lending options that may come with less risks.
401(k) loan calculatorSee how much you'll pay
|Loan terms (in years)|
Fill out the form and click on “Calculate” to see your estimated monthly payment.
orCompare personal loans now
Based on your loan terms
401(k) loan risks and alternatives
A 401(k) loan means you’rel borrowing out of your retirement, and it has hefty risks. It’s still “treated” like a more traditional loan, but there’s more at stake.
You’re pulling out money from your retirement fund and losing out on tax-free potential growth. Even if you fully repay the loan, you’re missing out on growth opportunities because you’ve temporarily removed money out of the account, and you may not be able to contribute to the account until the loan is paid off.
If you leave or lose your job while you still have the active 401(k) loan, it’s possible that you’ll be asked to repay the loan quickly — sooner than the typical five-year term. And if you’re unable to, you default, and owe taxes and a 10% penalty if you’re under the age of 59.5.
And on top of all that, not all 401(k) plans offer employees the option to borrow from it, so you’ll need to check with your employer first. A 401(k) account from previous jobs are not eligible for 401(k) loans, either.
Some alternatives to a 401(k) loan include:
- 401(k) withdraw. If you’re over the age of 59.5, you may be able to draw from your 401(k) without penalties. You may still be eligible to withdraw if you’re younger, but there are disadvantages.
- Home equity line of credit. Also known as a HELOC, these lines of credit can offer low rates.
- Home equity loan. Home equity loans come in a convenient lump sum, and can be 70% to 80% of your home’s equity if you qualify.
- Personal loans. A personal loan can be used for nearly anything and may have considerably less risks than 401(k) loans.
Compare personal loans before you dip into your retirement savings
Review personal lenders side-by-side to compare rates, credit score requirements and maximum loan amounts.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
What’s the average interest rate on a 401(k) loan?
Loan terms and rates are determined by your plan administrator — your employer, in other words. The interest rates on most 401(k) loans is prime rate plus 1% or 2%. The prime rate as of September 2022 is 5.5%.
Since you’re borrowing your own money, the interest isn’t paid to a lender. Instead, the interest is paid back into your 401(k) account.
How long do I have to pay off a 401(k) loan?
If your retirement plan permits loans, you have up to five years to repay your 401(k) loan. The only time the term is longer is if you’re using it to buy a home. And there’s no penalty for early repayment.
It usually takes about one week to get funds from a 401(k) loan. However, in some cases it can take upwards of three weeks or more.
When should I take out a 401(k) loan?
A 401(k) loan is a risky choice, and should be considered a last resort.
Most employer-sponsored 401(k) retirement plans allow employees to borrow against their accounts, but employers can restrict what you’re allowed to use the funds for. You’re also putting your retirement savings at risk, so be careful about what you’re borrowing for regardless of if there’s a restriction.
Situations that may necessitate a 401(k) loan include:
- Funeral expenses
- Making a down payment on a house
- Covering costs to prevent foreclosure or eviction
- Paying education costs for yourself or your family members
What am I losing by borrowing from my retirement savings?
There are consequences from borrowing from your retirement savings, consider these drawbacks before you take out a loan.
- You’ll lose out on potential gains. You lose the opportunity to benefit from investments on any money you borrow. While the interest you pay offsets some of that, it doesn’t always make up for the lost growth.
- You pay more in taxes. Under other circumstances, you don’t have to pay taxes on money you deposit into your 401(k). However, the payments you make toward a 401(k) loan will be with income that has already been taxed — and you’ll get taxed again when you make qualifying withdrawals.
- Contributions might not be possible. If you can’t afford regular contributions to your 401 (k) during your loan term, you could lose thousands on your retirement — especially if your employer matches contributions. Your employer might not allow contributions until the loan is paid back.
- Losing your job can be even more costly. If you leave your job for any reason, you’ll have to pay back your loan before your federal income taxes are due for the year. If you don’t, it’ll be reported as a distribution and you’ll potentially face taxes and an early withdrawal penalty.
- Defaults are treated as distributions. That means you’ll face the same taxes and potential penalties as if you were to withdraw the funds.
- The funds aren’t protected from bankruptcy. Once you borrow the funds from your 401(k), they’re no longer protected if you file for bankruptcy — and the court can take them to pay your creditors.
A 401(k) loan comes with a low interest rate and a smooth application process. But you only have five years to pay back your loan, you miss out on the potential growth of your investment and leaving your job can mean facing steep penalties if you can’t pay the loan back immediately.
For a potentially safer way to borrow, read our guide to personal loans.
More guides on Finder
OneLoanPlace connection service review 2022
A simple online form to find lenders — but it lacks specific information to help guide your choice.
Lend-Grow Personal Loan Marketplace
Get connected with a local lender with options for bad credit.
BHG Money personal loans review
Bankers Healthcare Group isn’t just for licensed healthcare workers. Compare large loans up to $200,000 with this legit online lender.
Universal Credit personal loan review
It may be owned by a top lender, but that doesn’t mean it’s upfront.
Worst drivers by state in 2021
TBH, we’re a bit surprised.
Texas disaster assistance for the 2021 Winter Storm
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Lenme peer-to-peer lender review
Lenme connects borrowers to investors through its simple app.
Best debt consolidation loans
Compare 7 lenders to find one that’s a good fit for your needs.
Lendtable cash advance for 401(k) matching review
This lender offers cash advances to up your employer’s 401(k) or ESPP contribution for a flat fee starting at 6% of your returns.
How to finance water storage tanks
Options for everything from small tanks that fit under your sink to complicated underground installations.
Ask an Expert