Understanding the Cost of a 401(k) Loan
See the tradeoffs and estimate the long-term impact before you borrow.
A 401(k) loan can feel like an easy option, but there may be hidden costs beyond the interest rate. Let us help you understand the pros, cons, and potential impact on your retirement savings.
Pros and Cons of a 401(k) Loan
Potential Advantages
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No credit check in many cases
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Access to funds quickly
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Interest is paid back into your own account
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May offer a lower rate than some personal loans or credit cards
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Payments are often automatic through payroll
Important Drawbacks
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Missed investment growth while the money is out of the market
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Repayments are made with after-tax dollars
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Leaving your employer may trigger a short repayment deadline
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Smaller paychecks during repayment
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Can reduce long-term retirement readiness
Estimate the Long-Term Cost
A 401(k) loan may seem manageable month to month, but the bigger cost is often the retirement growth you miss while the money is out of your account. Use the calculator below to compare scenarios.
This calculator is provided for general informational purposes only and does not constitute financial, tax, legal, or retirement planning advice. All results are estimates based on your inputs and simplified assumptions — they do not reflect your plan's specific terms, your complete financial situation, or changes in applicable law. Your employer's plan documents and Summary Plan Description govern all actual loan eligibility, limits, and repayment rules. IRS limits and regulations are subject to change; verify current figures with the IRS or a qualified professional before making any decisions.
Taking a 401(k) loan carries risks not fully captured by this tool, including the potential tax and penalty consequences of a loan default or job separation, and the opportunity cost of funds removed from investment. We make no warranties regarding the accuracy or completeness of this calculator's output and disclaim all liability for decisions made in reliance on it. This tool does not constitute a loan application and creates no obligation on the part of your plan administrator. Before proceeding, consult a qualified financial advisor, tax professional, or legal counsel. By using this calculator, you acknowledge and agree to these terms.
401(k) Loan Frequently Asked Questions
Find answers to common questions about borrowing from your retirement plan, repayment rules, taxes, and long-term retirement impact.
What is a 401(k) Loan?
A 401(k) loan allows participants to borrow money from their retirement account balance and repay themselves over time through payroll deductions, subject to plan rules and IRS limits.
Is a 401(k) loan a good idea?
A 401(k) loan can be helpful in certain situations, but it may reduce long-term retirement growth and create repayment risks if employment ends before the loan is repaid.
How much can I borrow from my 401(k)?
Many plans allow loans up to the lesser of $50,000 or 50% of your vested account balance, though plan-specific limits may apply.
Do I pay interest on a 401(k) loan?
Yes. Interest is typically paid back into your own account, but there can still be opportunity costs from money being out of the market
What happens if I leave my job with a 401(k) loan?
Depending on the plan and tax rules, remaining balances may need to be repaid or could become taxable if not handled properly.
Is a 401(k) loan better than a personal loan?
It depends on credit score, repayment ability, job stability, and the long-term impact on retirement savings. Both options should be compared carefully.