401(k) Loan Calculator
Borrow from your own 401(k) without triggering tax or penalty. See payment, total interest, and the opportunity cost of money not compounding in the market.
Loan Inputs
How to Use This 401(k) Loan Calculator
Use this tool when you are deciding whether to borrow from your plan instead of using savings, a personal loan, or an early withdrawal.
- Enter vested balance and requested loan amount. The tool automatically applies the IRS maximum of $50,000 or 50% of vested balance.
- Set the loan rate, term, and payment frequency. Most plan loans are repaid through payroll deduction, so frequency matters.
- Compare payment with opportunity cost. The interest goes back to your account, but the borrowed money is not in the market while you repay it.
How to Read the Results
Payment
This is the amount that will come out of each paycheck or payment period to repay the loan.
Approved
If you requested too much, this reveals the maximum amount your plan could legally lend.
Total Interest
This is the interest you pay back into your own account over the life of the loan.
Opportunity Cost
This estimates the market gains you may miss while the borrowed money is out of the account.
What to Do Next
How We Reviewed This Tool
Tool-Level Methodology
- Built the calculator to show both the visible loan payment and the hidden opportunity cost, because users often underestimate the second number.
- Checked the repayment examples against common plan-loan rules around term length and the IRS $50,000 or 50% vested-balance ceiling.
- Reviewed the interpretation copy so it distinguishes tax-free access from cost-free access.
Assumption Review
- Loan availability, rate spread, repayment frequency, and separation-from-service handling can vary by plan document.
- Opportunity cost depends on the assumed investment return and is therefore scenario-based rather than guaranteed.
- The calculator is strongest for comparing a loan against a withdrawal, not for documenting plan eligibility or legal repayment relief.
Update Log
- Rechecked the loan-cap language and job-change discussion against the current rule summary used elsewhere on the site.
- Aligned alternative-path links with early withdrawal and rollover pages so users can compare all common liquidity options.
- Updated the explanatory framing to better cover payback and interest-rate query variants.
How a 401(k) Loan Actually Works
You borrow from your own retirement account — the plan sells some of your holdings and sends you the proceeds. You repay yourself over up to 5 years (30 for primary home purchase) via payroll deduction. Because you are both borrower and lender, there is no income tax or 10% penalty if you repay on schedule.
The Opportunity Cost Nobody Mentions
While your $25,000 is out on loan at 8.5%, that money is not invested in the market. If the market returns 10% during those 5 years, you have missed ~$15,300 of gains. That is the opportunity cost our calculator shows. For borrowers with high-interest alternatives (credit cards at 22%+), a 401(k) loan still wins. For anything below 10%, it is often worse than a personal loan on an opportunity-cost basis.
Rules & Limits
- Max amount: lesser of $50,000 or 50% of vested balance (IRS §72(p)).
- Max term: 5 years (30 years for primary home purchase).
- Repayment: level, at least quarterly, via payroll deduction.
- Interest rate: commonly prime + 1% (about 8.5% in 2026). Interest returns to your own account.
- If you leave your job: under TCJA 2018, you have until your tax return due date (including extensions) to repay or roll to an IRA.
- If you default: unpaid balance is treated as a taxable distribution plus 10% penalty if under 59½.
When a 401(k) Loan Makes Sense
- Paying off high-interest credit card debt (20%+ APR)
- Short-term liquidity for medical emergencies without dipping into savings
- Down payment on a primary residence (qualifies for 30-year term)
- Avoiding predatory short-term loans or payday lenders
When to Avoid
- Job instability — balance comes due if you separate.
- You would need to pause 401(k) contributions to afford loan payments (losing employer match).
- Strong market is forecast (missed gains outweigh loan interest savings).
Frequently Asked Questions
How much can I borrow from my 401(k)?
IRS rules cap 401(k) loans at the lesser of $50,000 or 50% of your vested account balance. Some plans permit smaller amounts or none at all. Check your plan document.
What is the interest rate on a 401(k) loan?
Typically prime rate + 1% (currently around 8.5% in 2026). The interest you pay goes back into your own 401(k) account, not to a bank — but the money is not earning market returns while borrowed.
What happens if I leave my job with a 401(k) loan?
Previously, the outstanding balance came due within 60–90 days or was treated as a taxable distribution plus 10% penalty. Under the Tax Cuts and Jobs Act, you now have until your tax return filing deadline (including extensions) to repay or roll the balance to an IRA.
Is a 401(k) loan double-taxed?
Interest on a 401(k) loan is paid with after-tax dollars but then taxed again when withdrawn in retirement. This 'double taxation' is often overstated — the interest goes to your own account, not a lender — but it is a real cost.
Further Reading
- Reviewed by David Jones
- Limits Updated for 2026 IRS contribution caps
- Formulas Verified quarterly
Review & Methodology
- Reviewed by David Jones (calculator methodology).
- Updated for 2026 IRS contribution limits (refreshed after each annual IRS notice).
- Core calculator formulas are re-tested quarterly; limit-driven logic is checked when IRS guidance changes.
- Educational projections only — not investment, tax, or wealth-management advice. Calculations run locally in your browser.