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Understanding the Mechanics of 401(k) Loans: A Guide for Anticipated Outcomes

A 401(k) loan can provide money when you need it, but it’s important to know how the process works. Each employer is different, so a first step is to verify that your job offers 401(k) loans, and you also need to know exactly how much money you have access to. This video covers the rules and logistics of borrowing from a 401(k) plan. You’ll understand how to get a 401(k) loan and what to expect when it comes to repaying your loan. We also review some costs and risks, including interest costs and potential opportunity cost. But perhaps the biggest risk for some people is needing to repay the loan when you leave your job. You can typically borrow up to $50,000 or 50% of your “vested” loan balance (see what vesting means here: That can be straightforward or complicated, depending on what types of money you have in your 401(k) and any loans you’ve taken in the past. Borrowers don’t need to qualify based on a credit score, and you typically repay 401(k) loans over five years.