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 calculator

See how much you'll pay
Your loan
Loan amount
$
Loan terms (in years)
Interest rate
%

Fill out the form and click on “Calculate” to see your estimated monthly payment.

or

Compare personal loans now
You can expect to pay back $ per month
Based on your loan terms
Principal $
Interest $
Total Cost $

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.

1 - 7 of 7
Name Product Filter Values APR Min. Credit Score Loan Amount
Best Egg personal loans
7.99% to 35.99%
640
$2,000 to $50,000
A prime online lending platform with multiple repayment methods.
Credible personal loans
3.99% to 35.99%
Fair to excellent credit
$600 to $100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
Bankrate
Bankrate
4.98% - 35.99%
Poor to excellent credit
$1,500 to $100,000
FreedomPlus personal loans
7.99% to 29.99%
600
$5,000 to $50,000
Consolidate debt and more with these low-interest loans. Cosigners welcome.
Upstart personal loans
5.6% to 35.99%
300
$1,000 to $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
Upgrade personal loans
7.46% to 35.97%
600
$1,000 to $50,000
Affordable loans with two simple repayment terms and no prepayment penalties.
SoFi personal loans
7.99% to 23.43%
680
$5,000 to $100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.
loading

Compare up to 4 providers

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.

Bottom line

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

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site