401k Loan Calculator
Calculate your monthly loan payments and instantly see the real cost of borrowing from your 401k, including lost investment growth.
What is a 401k Loan Calculator?
A 401k loan calculator is a financial modeling tool that computes your estimated monthly repayment schedule when borrowing from your retirement account. Crucially, it also calculates the opportunity cost—the amount of compounded growth your money would have earned had it remained invested in the market during the loan repayment period.
Estimated Payment
401(k) Loan Calculator Terms
Deciding to borrow from your retirement account is a major financial choice. While taking a 401(k) loan offers fast access to cash without a standard credit check, it can severely impact your long-term wealth. To use our premium 401k loan calculator effectively, it is critical to understand the following key terms:
Loan Amount (Principal)
This is the total amount of cash you are withdrawing from your vested 401(k) balance. Under IRS rules, the maximum you can borrow is usually 50% of your account balance, capped at $50,000.
Repayment Term
The number of years you have to pay the borrowed money back into your account. The standard maximum term for a general-purpose 401(k) loan is 5 years. If the loan is used to purchase a primary residence, the term can sometimes be extended.
Interest Rate Paid to Self
Unlike a bank loan where interest is paid to a lender, the interest on a 401(k) loan is paid back into your own retirement account. This rate is usually set by your plan administrator (often the Prime Rate plus 1% or 2%). While paying yourself sounds great, remember that these payments are made with after-tax dollars.
Lost Market Opportunity
This is the hidden cost of a 401(k) loan. When you remove funds from your 401(k), that money is no longer invested in the stock market. Because it halts your compound interest, you lose out on the potential market growth those funds would have earned during the repayment period.
Frequently Asked Questions About Borrowing from your 401k
Yes. Using a borrowing 401k calculator is crucial before taking out a loan. A 401k loan calculator not only shows your required payments but visualizes the "opportunity cost" of pulling your money out of the market. Since your funds are removed from your investments, you miss out on potential market gains over the duration of the loan.
When you borrow from your 401k, you receive the cash tax-free, but you must repay it with interest. The key difference from a bank loan is that you pay the interest to yourself—it goes back into your 401k account. However, you are making these repayments with "after-tax" money, meaning you will be double-taxed on those specific funds when you retire.
Under IRS rules, the maximum amount you can borrow from your 401k is 50% of your vested account balance, up to a maximum limit of $50,000. If your balance is less than $10,000, some plans may allow you to borrow up to the full $10,000.