How Do I Apply for a Loan?
If unexpected expenses arise and you need to access money in your account, one option is to apply for a loan from your retirement plan account. The loan process is very similar to that of your bank or credit union. Not all plans have a loan program – but if yours does, a Retirement Specialist can talk to you about the details and how to apply.
How much can I qualify for?
For most plans, you can borrow between $1000 and 50% of your vested account balance, up to a maximum of $50,000. To find out how much you may qualify for, contact us.
How soon do I have to pay it back?
The maximum term for a general purpose loan is 5 years from the date you receive the loan amount. The term for a loan to purchase a primary residence for most plans is 15 years. Loan repayments consist of principal and interest, and you’ll generally have to make them on a monthly basis.
For most plans, you can only have one outstanding loan at any time. You’ll have to pay off any old loans before taking a new one. If you default on a loan, you can’t qualify for a new loan until the balance of the defaulted loan is repaid, including any interest and fees.
What are the pros and cons?
There are both advantages and disadvantages to taking a loan against your account balance. Weigh these points carefully before making your decision.
- No credit check
- Loans aren't taxed unless you default on the loan or have exceeded the loan limits
- Competitive interest rates are paid back to your plan account instead of to a conventional lender
- Loan repayments are invested in your plan account funding selections
- Reasonable repayment terms
- Repayments are made with after-tax dollars
- Loan repayments included in distributions are taxable
- Loans must be repaid with interest
- A defaulted loan is considered a distribution, and is subject to tax reporting and income taxes
- You may lose the benefits of compounding interest over time
- Could affect your ability to qualify for loans outside the retirement plan
Get the help you need
Contact us if you have questions about the loan program.