Understanding 401(k) Loans: How Our 401(k) Loan Calculator Works
A 401(k) loan allows you to borrow money from your own retirement account and repay it over time—with interest that goes back into your balance. Our 401(k) Loan Calculator helps you estimate how much you can borrow, what your payments will look like, and how different repayment terms may affect your long-term retirement savings.
💡 What Is a 401(k) Loan?
A 401(k) loan lets you borrow against your vested retirement savings without a credit check. You repay yourself—typically through automatic payroll deductions—within five years. However, withdrawing funds temporarily reduces your invested balance and can affect long-term growth.
Most 401(k) plans from providers like Fidelity, Vanguard, Empower, or Voya allow you to borrow up to 50% of your vested balance, up to a maximum of $50,000.
🧮 How the Calculator Works
The calculator estimates your payment schedule using standard loan amortization math. Simply enter your loan amount, interest rate, and repayment term in years. The result shows your estimated monthly, biweekly, or weekly payment.
Payment = (Loan Amount × r) / [1 - (1 + r)^(-n)]
Where r = periodic interest rate, n = total number of payments
Key Features:
- • Estimates total repayment and payment frequency
- • Supports monthly, biweekly, and weekly schedules
- • Shows total interest and principal breakdown
- • Optional impact projection on retirement balance
Example Calculation:
- • Loan Amount: $10,000
- • Interest Rate: 6%
- • Term: 5 years
- • Payment Frequency: Monthly
💰 Understanding Interest Rates
The interest rate on a 401(k) loan is usually tied to the prime rate plus 1%. For example, if the current prime rate is 8.5%, your plan may charge around 9.5%. The calculator uses this rate to estimate your repayment cost and schedule.
Monthly Payments
Standard option for most users. Payments are spread evenly over each month of the loan term.
Biweekly or Weekly Payments
Choosing biweekly or weekly payments may slightly reduce total interest paid and shorten your loan duration.
📉 Pros and Cons of 401(k) Loans
Before using your retirement funds as a loan source, consider both advantages and drawbacks:
- ✓No credit check or external approval needed
- ✓Interest goes back into your own 401(k) account
- ⚠Lost investment growth while the money is out of your account
- ⚠Loan may become taxable if you leave your job before full repayment
📊 How This Calculator Helps You
Our 401(k) Loan Calculator provides clear insights before you borrow:
- • Accurate repayment estimates
- • Interest and principal breakdowns
- • Monthly, biweekly, or weekly comparisons
- • Customizable loan term and rate options
- • Optional impact on retirement growth
🧠 Final Thoughts
Borrowing from your 401(k) can be a flexible way to access funds, but it also reduces your invested balance temporarily. Use this calculator to compare repayment options, estimate your costs, and decide if a 401(k) loan aligns with your financial goals.
Whether you have a Fidelity, Vanguard, Empower, or Voya 401(k) plan, our tool helps you plan smarter and stay on track for retirement.