401(k) Loan Calculator
Calculate your 401(k) loan payment, the interest you pay back to your own account, and the true opportunity cost of borrowing from your retirement savings.
Loan Details
Only the vested portion of your balance counts toward the loan limit
IRS maximum for your balance: $30,000 (lesser of 50% of vested balance or $50,000)
Most plans charge prime + 1% (≈ 9.5%). The interest goes back into your own account
1–5 years; 5 is the IRS maximum unless the loan buys your primary residence
Your Situation
Used for the early-withdrawal penalty warning (applies under age 59½)
What the borrowed money would likely earn if it stayed invested
Monthly Payment
60 payments over 5 years
Interest Paid to Yourself
Goes back into your 401(k), not to a bank
Forgone Investment Growth
If $20,000 had stayed invested at 7%
Net Opportunity Cost
Forgone growth minus interest repaid to your account
Repayment Summary
Interest is double-taxed
You repay the $5,202 of interest with after-tax dollars from your paycheck, and you will pay income tax on it again when you withdraw it in retirement. The principal is not double-taxed — only the interest.
Job-separation risk
If you leave or lose your job, the outstanding balance is typically due by your tax-filing deadline (including extensions) for that year. Any amount you do not repay or roll into an IRA is treated as a distribution: ordinary income tax plus a 10% early-withdrawal penalty since you are under 59½.
How it works
A 401(k) loan lets you borrow from your own retirement balance and repay it — with interest — back into your account through payroll. It avoids a credit check and the interest goes to you, but the borrowed money stops growing in the market while it's out.
Repayment (amortizing)
M = P · r(1 + r)ⁿ / [(1 + r)ⁿ − 1]
- P
- amount borrowed (usually max 50% of vested balance, up to $50k)
- r
- monthly rate on the loan
- n
- payments (often up to 5 years)
Worked example
- Borrow P = $20,000 at 6%
- 5-year repayment → n = 60
- M = 20,000 × amortization factor at 6%/5yr
Payment ≈ $387/month back into your own account.
Good to know
- The real cost is opportunity cost: the borrowed funds miss any market growth while repaid — often more than the interest you pay yourself.
- Leave or lose your job and the balance can become due quickly; an unpaid balance is treated as a taxable early withdrawal (income tax + 10% penalty).
- Borrowing is generally limited to 50% of your vested balance or $50,000, whichever is less.
Related Calculators
Frequently Asked Questions
How much can I borrow from my 401(k)?
IRS rules generally cap a 401(k) loan at 50% of your vested balance or $50,000, whichever is less. Individual plans can set lower limits or not offer loans at all, so check with your plan administrator first.
How is a 401(k) loan repaid?
Usually through automatic payroll deductions over up to five years — longer is allowed if the loan buys your primary residence. You pay interest, typically around prime plus 1-2%, back into your own account rather than to a bank.
What happens to my 401(k) loan if I leave my job?
Most plans require repayment shortly after you separate. Any unpaid balance is treated as a distribution: you owe income tax plus a 10% penalty if under 59½. You can avoid this by rolling the offset amount into an IRA by your tax-filing deadline for that year.
Is a 401(k) loan cheaper than a personal loan?
It avoids a credit check, does not appear on your credit report, and the interest goes back to you. But the borrowed money misses market growth, and a job change can trigger taxes and penalties. Compare total cost including lost investment growth, not just the interest rates.
What is the real cost of borrowing from my 401(k)?
Mostly opportunity cost: money out of the market stops compounding. Borrowing $20,000 for five years during a stretch of 7% returns forgoes roughly $8,000 of growth — often more than the interest saved versus an outside loan.