TSP Loan Guide

What a TSP loan does

A Thrift Savings Plan loan lets an eligible participant borrow from their own employee contributions and associated earnings, then repay principal and interest into the account. The borrowed money leaves the invested balance while it is outstanding. This creates a tradeoff between cash available today and investment exposure inside the retirement account. Account mechanics

The rules below were reviewed in September 2026. The rate in an older article is not a quote for a new application. Your available amount, payment schedule and any required consent must be checked in the actual TSP application.

Who can apply

The regulations require eligibility to contribute, pay status and at least $1,000 of employee contributions and attributable earnings. More than 30 business days must have elapsed since repayment in full of any TSP loan. A government shutdown creates an exception to the pay-status requirement for participants furloughed or excepted from furlough; it does not waive every other condition. Eligibility rule

Married participants may also face consent or notification requirements. A FERS or uniformed-services participant generally needs the spouse's signed consent, subject to specified exceptions. Court orders can restrict borrowing from an affected account. These are reasons to review the application requirements before relying on a proposed disbursement date. Spousal requirements

Loan types, fees and terms

The fee is deducted from the proceeds. A residential loan is for buying or constructing a primary residence and requires supporting documentation. It is not a general home-improvement facility. Loan purpose and terms and fees

A participant may have two outstanding loans per TSP account, with no more than one residential loan in that account. Someone with both civilian and uniformed-services accounts can have two in each, but the amount-limit calculation considers the accounts together. The loan-count allowance does not create a separate $50,000 limit for each account. Number of loans

How the maximum is calculated

The minimum initial principal is $1,000. The maximum is the smallest of three limits. First, the employee-contribution balance and its earnings, excluding outstanding loan principal. Second, the greater of $10,000 or 50% of the eligible vested employee-contribution balance including loans, minus outstanding loans. Third, $50,000 minus the highest outstanding loan balance during the preceding 12 months. Amount rule

Agency automatic and matching contributions are not an additional borrowing pool. Civilian and uniformed-services balances and loans are considered together, and mutual-fund-window assets are excluded. Paying off a recent loan does not necessarily restore the maximum immediately because the lookback remains relevant.

Interest and the real cost

The loan uses the monthly G Fund rate in effect on the 15th of the month before the request. That rate normally stays fixed until repayment, with a qualifying active-duty military exception. Confirm the actual rate when applying instead of using the old 4.125% illustration. Interest-rate rule

Interest paid into your account is funded from your own cash flow. It is not an investment return supplied by an outside borrower. The broader cost depends on investment performance while funds are out, fees, repayment capacity and whether borrowing causes you to reduce new retirement contributions. Future market returns are uncertain, so there is no universal percentage loss attached to taking a loan.

Repayment and leaving federal service

For active participants, payments generally come through payroll. The first payment is due by the 60th day after issuance, and interest accrues from issuance. A missed payment needs attention even if later payroll deductions restart. The regulations specify a cure process and consequences for unresolved delinquency. Repayment requirements

After separation, an existing loan may be repaid in full or continued through permitted payments, including direct debit. Follow the deadline supplied by the TSP record keeper. There is no universal rule that every separated participant's loan is automatically foreclosed after 90 days. Failing to start payments or cure missed payments can lead to a loan offset. Post-separation rule

Before deciding

Compare the cash you will actually receive, the scheduled payment, other borrowing costs and the effect on ongoing contributions. Tax consequences differ between ordinary repayment, a deemed distribution and a loan offset. For an individual decision, use the TSP's notice and qualified tax advice where needed. Distribution and offset rules

The original retirement-balance claim is preserved below as dated analytical history. Its 15% to 20% range is not supported here by a reproducible calculation and should not be used to estimate your outcome. The current explanation above replaces that generalized claim with the actual variables a participant needs to compare.

Historical calculations retained from the original study

The following limited examples are preserved from the original publication. Their assumptions and outputs have not been revised. They are not current operating measurements, a new Northwise forecast or a statement of current contracted prices. The factual discussion above uses the latest reviewed evidence.

This December 2025 paragraph includes a 4.125% rate illustration and a 15% to 20% retirement-balance claim. It is retained as historical analytical evidence, not endorsed as a reproducible model or current personal outcome. Check the current application and the sourced rules above.

If a participant has high-interest credit card debt, taking a TSP loan at the 4.125 percent rate can be mathematically sound. However, many participants reduce their new contributions to afford the loan repayment. This combination of missing market growth and contributing less new money can reduce final retirement balances by 15 to 20 percent over a career.