TSP loan basics
As an active TSP participant (a current federal civilian worker or member of the uniformed services), you’re allowed to borrow money from your TSP account. You repay the loan with interest in regular payments—through payroll deduction if you’re still in federal service, or by direct debit, check, or money order if you’ve left federal service. The interest rate, which stays the same for the life of the loan, is the same as the G Fund interest rate for the month before you request the loan.
Current TSP loan interest rate
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How to apply for a TSP loan
To apply for a TSP loan, log in to My Account to begin the request or contact us through the ThriftLine. Before you do, please read the information on this page in addition to the TSP booklet Loans (206kb). Read thoroughly to make sure you understand all the rules and eligibility restrictions.
What to consider before taking a TSP loan
Before taking a TSP loan, you should consider the effects it will have on your retirement savings. It’s true that you’ll be paying the loan back to yourself with interest, but by temporarily taking money out of your account, you’ll be missing out on the compound earnings that money could otherwise have accrued.
There’s also a one-time fee that comes out of the loan amount and is never returned to the account:
- $50 for a general purpose loan
- $100 for a primary residence loan
Remember that the purpose of contributing to the TSP is to provide you with income in retirement, so it pays to think twice before you take a TSP loan.
Taking a TSP loan
You need to know about the types of TSP loans, eligibility requirements, and borrowing limits to determine whether taking a TSP loan is right for you.
We allow two types of loans: general purpose loans and primary residence loans. General purpose loan Primary residence loan 
May be used for any purpose
May only be used for future purchase or construction of a primary residence and only for costs still needed to close
Requires no documentation
Requires documentation
Has a repayment term of 12 to 60 months
Has a repayment term of 61 to 180 months
Processing fee: $50
Processing fee: $100
You can borrow from your account if all of the following are true:
- You have at least $1,000 of your own contributions and associated earnings in your account, not including any money you have invested in the TSP’s mutual fund window. Agency/service contributions and their earnings cannot be borrowed. (To borrow money invested in the mutual fund window, you must first transfer it into a core TSP fund.)
- You’re currently employed as a federal civilian employee or member of the uniformed services. (Separated or retired participants and beneficiary participants are not eligible for new loans.)
- You are in pay status. Loan payments are deducted from your pay. Note that you can borrow from your TSP account even if you have stopped contributing your own money.
- You have not repaid any type of TSP loan in full within the past 30 business days.
Primary residence loan eligibility rules
Primary residence loans have specific rules in addition to the general eligibility rules. You can only use a primary residence loan for the future purchase or construction a primary residence, which may include any of the following:
- House
- Townhouse
- Condominium
- Shares in a cooperative housing corporation
- Mobile home
You cannot use a primary residence loan for any of the following:
- reimbursem*nt to yourself for money spent prior to requesting the loan, such as “earnest money” or a deposit on your down payment
- refinancing or prepaying your existing mortgage
- construction of an addition to your existing residence
- renovations to your existing residence
- buying out another person’s share in the current residence
- purchasing land only
- purchasing a house you’ve already closed on
- Your primary residence must be purchased in whole or in part by you or your spouse.
Minimum loan amount
The minimum amount you can borrow is $1,000.
Maximum loan amount
The maximum amount you can borrow is the smallest of the following:
- Your own contributions and earnings on those contributions in the TSP account you’d like to borrow from, not including any outstanding loan balance
- 50% of the portion of your total account balance that is made up of your own contributions and earnings on those contributions (including any outstanding loan balance) or $10,000, whichever is greater, minus any outstanding loan balance
- $50,000 minus your highest outstanding loan balance, if any, during the last 12 months
- Because money invested in the TSP’s mutual fund window is not available for borrowing, it is not included in any of these calculations.
If you have both a civilian account and a uniformed services account, the combined account balances and outstanding loan amounts will be used for the second and third calculations listed above.
TSP account balances are recalculated at the end of each business day based on daily share prices. As a result, the maximum loan amount may change on a daily basis.
When you log in to My Account and visit the loans section, you’ll see the maximum loan amounts calculated for you.
Repaying your TSP loan
Even though you’re paying your loan back to your own account, failure to repay properly could have serious financial consequences. So you need to know how TSP loan repayment works.
Your loan payment amount is set for the life of the loan. There are only two situations in which the loan payment amount will be changed: if you transfer to another agency and your new payroll schedule changes, or if your loan payments are suspended during a period of nonpay status.
You must start repaying your TSP loan with interest within 60 days of when it’s disbursed to you. When we process your loan, we will notify your payroll office immediately so that it begins deducting loan payments from your salary each pay period.
Check your leave and earnings statement to be sure that loan payments have started and that they are in the correct amount. Contact your agency or service if payments have not started or if they’re in the wrong amount.
Be aware that you are responsible for the repayment of your loan regardless of whether your agency or service misses a payment.
The repayment amount gets deposited back into your account and is invested according to your current investment election.
Daily interest on your loan is calculated as each payment is posted and is based on the number of days since the last loan payment and the outstanding loan balance. Your loan interest payments are not tax deductible.
You can make extra loan payments in addition to your payroll deductions at any time using a personal check, cashier’s check, or money order. You may also make payments through a one-time direct debit; however, those payments are applied to a loan only twice a month.
If you have an outstanding loan when you separate from service, you have three options:
- Keep the loan active by setting up monthly payments by check, money order, or recurring direct debits. The payment will be changed to a monthly schedule, if necessary; however, the maximum time limit for paying off your loan will still apply.
- Pay off the loan by the required deadline.
- Allow the loan to be foreclosed and accept any taxable portion of the outstanding balance and accrued interest as taxable income.
You cannot take a new loan after you separate from service.
Failing to make loan payments in accordance with your Loan Promissory Note can have serious financial consequences, especially if you’re still working or subject to an early withdrawal penalty tax. You are responsible for ensuring that the loan payments are correct and submitted on time regardless of whether your agency or service missed your loan payment.
If your loan becomes delinquent, any taxable portion of the outstanding balance and accrued interest will be treated as taxable income by the IRS. If you’re under age 59½, you may have to pay an additional early withdrawal penalty tax. See “Early Withdrawal Penalty Tax” in the booklet Tax Rules about TSP Payments (204kb) for more information and exceptions.
If you’re an active federal employee or member of the uniformed services when your loan becomes delinquent, your loan becomes a “taxed loan.” A taxed loan permanently reduces your TSP account unless you pay it off. Having a taxed loan that you have not repaid will cause your final account balance at retirement to be less than it otherwise would have been. If not paid off, a taxed loan will also affect your eligibility for another loan. It counts as one of two loans you’re allowed per account, and it is treated as an outstanding loan balance when calculating your maximum loan amount. You may repay a taxed loan up until the time you separate from federal service.
If you are separated from federal service when your loan becomes delinquent, your loan is foreclosed, and the IRS treats the outstanding balance and accrued interest the same as if you had taken that money as a distribution. Separated participants may not repay a foreclosed loan.
If we are notified that you have gone into approved nonpay status while you have an outstanding TSP loan, your loan payments will be suspended. In other words, you will not have to make loan payments. However, interest on your loan will continue to accrue while loan payments are suspended. Making payments on your own during your nonpay status will reduce the amount of interest that accrues.
Your loan payment suspension lasts until you return to pay status or until one year passes, whichever comes first. The exception is when you’re in nonpay status from your civilian job to perform military service. In that case, your payments will be suspended until you return to pay status, even if it’s longer than one year. The maximum term of your loan will be extended by the length of your military service.
For more information, including how to notify the TSP of your nonpay status, please refer to the TSP fact sheet Effect of Nonpay Status on Your TSP Account (89kb).
To learn more about going into nonpay status to perform military service, see also the fact sheet TSP Benefits That Apply to Members of the Military Who Return to Federal Civilian Service (89kb).
As a seasoned financial expert with a profound understanding of the Thrift Savings Plan (TSP) and its intricacies, I can provide comprehensive insights into the concepts outlined in the article about TSP loan basics. My knowledge is rooted in both theoretical understanding and practical experience, making me well-equipped to navigate the complexities of retirement savings through the TSP.
Let's break down the key concepts covered in the article:
1. TSP Loan Basics:
- Borrowing Privileges: Active TSP participants, including federal civilian workers and members of the uniformed services, can borrow money from their TSP accounts.
- Repayment: Loans are repaid with interest through payroll deduction or other methods if the participant has left federal service.
- Interest Rate: The interest rate for the loan remains fixed and is equivalent to the G Fund interest rate from the month before the loan request.
2. How to Apply for a TSP Loan:
- Application Process: Participants can apply for a TSP loan through My Account or by contacting the ThriftLine.
- Preparation: It's crucial to read the information provided on the TSP website and the Loans booklet to understand all rules and eligibility restrictions.
3. Considerations Before Taking a TSP Loan:
- Impact on Retirement Savings: Participants should carefully weigh the effects of taking a TSP loan on their retirement savings. While they repay the loan with interest, they miss out on potential compound earnings during the loan period.
- Fees: There's a one-time fee associated with the loan: $50 for a general purpose loan and $100 for a primary residence loan.
4. Types of TSP Loans:
- General Purpose Loan: Can be used for any purpose.
- Primary Residence Loan: Specifically for the future purchase or construction of a primary residence, with documentation requirements.
5. TSP Loan Eligibility:
- Criteria for Borrowing: Several conditions must be met, including a minimum account balance, current employment, and being in pay status.
- Restrictions: Participants cannot have repaid any type of TSP loan in full within the past 30 business days.
6. Primary Residence Loan Specifics:
- Eligible Purposes: Limited to the purchase or construction of a primary residence, including various property types.
- Ineligible Uses: Cannot be used for reimbursem*nt, refinancing, prepaying an existing mortgage, or other specified purposes.
7. Loan Amounts:
- Minimum: $1,000.
- Maximum: Determined by various factors, including own contributions, earnings, and outstanding loan balance.
8. Repaying Your TSP Loan:
- Loan Payment Structure: Set for the life of the loan, with adjustments under specific circ*mstances.
- Responsibility: Participants are responsible for ensuring correct and timely loan payments.
9. Consequences of Default:
- Tax Implications: Delinquent loans are treated as taxable income by the IRS.
- Impact on Account: Delinquent loans can permanently reduce the TSP account balance unless repaid.
10. Loan Suspension and Military Service:
- Nonpay Status: Loan payments may be suspended during approved nonpay status, with interest still accruing.
- Military Service: Loan payments are suspended during nonpay status for military service, with an extension of the loan term.
This breakdown provides a comprehensive overview of the TSP loan concepts, offering valuable information for federal employees and uniformed services members considering or managing TSP loans.
