401(k) Loan Payoff Calculator: Time and Interest to Clear It
See how long a 401(k) loan takes to clear at a fixed monthly payment — and remember that the hidden cost is the foregone investment growth on the borrowed amount.
Adjust the inputs and select Calculate for a full breakdown.
Year-by-year payoff schedule
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Time to pay off | Total interest | Total paid |
|---|---|---|---|
| $15k · 8% · $300/mo | 5y 2m | $3,306.70 | $18,306.70 |
| $30k · 9% · $600/mo | 5y 3m | $7,741.31 | $37,741.31 |
| $5k · 7.5% · $150/mo | 3y 2m | $624.38 | $5,624.38 |
| $50k home loan · 8% · $500/mo | 13y 10m | $32,670.64 | $82,670.64 |
How This Calculator Works
Enter the outstanding loan balance, the plan's interest rate (typically prime + 1% to 2%), and the monthly payment (usually deducted from paychecks automatically). The calculator simulates interest and payments month by month and counts the months to payoff. Standard plan loans must clear within 5 years (or longer for primary-home loans).
The Formula
Debt Payoff Time
B = balance, P = fixed monthly payment, r = monthly rate (APR ÷ 12), n = months to clear
Worked Example
A $15,000 401(k) loan at 8% APR paid down at $300 a month clears in 62 months and adds about $3,307 in interest — interest you pay to your own account. The hidden cost: if the market returned 8% over the same period, the $15,000 you borrowed would have grown by roughly $5,400. The interest paid to yourself doesn't replace that foregone growth.
Key Insight
401(k) loans look attractive because the interest goes back into your own account. The catch is foregone investment growth — the borrowed amount is parked in cash earning loan interest instead of compounding in the market. In an 8% market with an 8% loan rate, the result is approximately break-even; in a stronger market, the loan costs you. The bigger risk: leaving your employer with the loan outstanding triggers an immediate payoff demand or treats the balance as a taxable distribution.
401(k) loan economics — paying yourself back
401(k) loan interest is paid to your own account, not to a bank. A $20,000 loan at 9% rate produces $1,800/year interest — flowing back to your 401(k) balance. This makes the loan look more attractive than other forms of credit (you're 'borrowing from yourself').
But: opportunity cost. The borrowed $20,000 would otherwise be invested in stocks/bonds earning expected ~7-8% return. While the loan is outstanding, that $20K isn't earning market returns. Net effect: you pay yourself 9% interest but lose 7-8% market return = net cost ~1-2% per year.
For loans repaid quickly (1-2 years), this cost is modest ($400-$800 on $20K). For long-term 401(k) loans, the cost compounds substantially. The 'paying yourself back' framing is somewhat misleading — the interest does flow to your account but doesn't fully compensate for foregone market returns over multi-year horizons.
Employment termination — the catastrophic risk
When a borrower leaves the employer (voluntarily or involuntarily), most plans require full repayment of 401(k) loan balance within 60-90 days. If borrower can't pay: outstanding balance is treated as taxable distribution PLUS 10% early withdrawal penalty (if under 59½).
Example: $20,000 outstanding 401(k) loan, borrower laid off. Federal income tax (24% bracket): $4,800. State tax (5%): $1,000. 10% penalty: $2,000. Total tax cost: $7,800 on $20,000 loan that became distribution. Plus borrower lost the retirement savings going forward.
Mitigation under SECURE 2.0 Act (effective 2024): borrowers have until October 15 of year following separation to pay off OR roll over outstanding balance to IRA. This extension provides 6-18 months to address the situation rather than 60-90 days, dramatically improving outcomes for laid-off workers. But the basic structure remains: 401(k) loans are very risky for workers whose jobs may not be stable over the loan period.
401(k) loan vs alternatives — typical costs and risks
Reference comparison of 401(k) loans vs alternative borrowing sources.
| Source | Typical rate | Risk if job loss | Opportunity cost |
|---|---|---|---|
| 401(k) loan | 9-10% | Severe (taxable distribution + penalty) | Foregone market return (~7-8%) |
| HELOC | 7-9% | Home foreclosure risk | None on investment portfolio |
| Personal loan | 9-15% | Default + credit damage | None |
| Credit card | 18-29% | Default + credit damage | None |
| Family loan (5% interest) | 5% | Family conflict if default | None |
| Hardship 401(k) withdrawal | n/a (not loan) | Permanent retirement loss + tax + penalty | Foregone market return |
| Refinance vs new debt | Variable | Standard | None |
401(k) loans look attractive ('borrow from yourself') but carry the worst job-loss risk of any borrowing source. The combination of mandatory repayment timeline and tax+penalty on default makes 401(k) loans inappropriate for borrowers with unstable employment. For borrowers with stable employment and short repayment horizon, modest 401(k) loans can be reasonable; for longer terms or unstable employment, alternatives are typically better.
Frequently Asked Questions
How much can I borrow from my 401(k)?
The lesser of $50,000 or 50% of your vested account balance. Some plans cap lower or restrict reasons. Primary-home loans can sometimes exceed the standard limit.
Is interest paid to me or to the lender?
To you — the interest goes back into your 401(k) account. That sounds free but isn't, because the principal you borrowed is out of the market during the loan period, foregoing potential investment growth.
What if I leave my employer?
Most plans require immediate payoff (within 60 to 90 days). If you can't pay, the outstanding balance is treated as a taxable distribution — adding ordinary income tax plus a 10% early-withdrawal penalty if you're under 59½. This is the biggest 401(k) loan risk.
Does the loan affect my credit score?
No — 401(k) loans don't appear on credit reports. They don't help build credit, but they also don't hurt your score if you miss payments. The consequence of missed payments is taxable-distribution treatment, not credit damage.
Should I take a 401(k) loan?
Generally a last resort after savings, HELOC, and personal loans. The job-loss risk is the killer issue — losing your job with an outstanding 401(k) loan turns it into a tax-and-penalty event. Use only if you're confident in continued employment.
When is this calculator unreliable?
When ignoring the job-loss risk — if the borrower changes employer during the loan period, the outstanding balance must typically be repaid quickly (60-90 days under most plans, though SECURE 2.0 Act extended this to October 15 following separation year). Default produces taxable distribution + 10% penalty for borrowers under 59½. For borrowers with unstable employment, 401(k) loans carry catastrophic risk.
References & Authoritative Sources
- Internal Revenue Service (IRS) — Retirement Plan Loans Guidance · consulted June 1, 2026 · Federal regulator guidance on 401(k) loans
- U.S. Department of Labor (DOL) — Employee Benefits Security Administration — 401(k) Loan Regulations · consulted June 1, 2026 · Federal employee benefits regulator
- Vanguard — How America Saves — Annual 401(k) Plan Behavior Report · consulted June 1, 2026 · Industry data on 401(k) loan utilization
Related Calculators
Methodology & Review
401(k) loan payoff calculates payment schedule for retirement plan loan. U.S. 401(k) loans typically: max $50K or 50% of vested balance; 5-year repayment term (longer for primary residence purchase); interest rate prime + 1-2% (~9-10% in 2024); payments via payroll deduction; interest paid back to your own account. The calculator returns payoff schedule. RELIABILITY: Reliable for documented loan terms with employment continuity. Less reliable when: borrower leaves employer (most plans require full repayment within 60-90 days of job change or treat as taxable distribution + 10% penalty); when investment returns during loan period exceed loan rate (opportunity cost); or when 401(k) hardship distribution would be alternative.
Updated