401k Loan Calculator

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401k loan calculator
Monthly (12 per year)Bi-Weekly (26 per year)Weekly (52 per year)Semi-Monthly (24 per year)
Results:
Periodic Payment:$ 0.00
Total Payments:0
Total Interest Paid:$ 0.00
Total Cost of Loan:$ 0.00
function calculate401k(){var amt=parseFloat(document.getElementById('loanAmt').value);var rate=parseFloat(document.getElementById('intRate').value);var years=parseFloat(document.getElementById('loanTerm').value);var freq=parseInt(document.getElementById('calc_type').value);var showSteps=document.getElementById('steps').checked;if(isNaN(amt)||isNaN(rate)||isNaN(years)){alert('Please enter valid numeric values.');return;}var r=(rate/100)/freq;var n=years*freq;var pmt=0;if(r===0){pmt=amt/n;}else{pmt=amt*(r*Math.pow(1+r,n))/(Math.pow(1+r,n)-1);}var totalCost=pmt*n;var totalInt=totalCost-amt;document.getElementById('paymentVal').innerHTML=pmt.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2});document.getElementById('totalNumPayments').innerHTML=n;document.getElementById('totalIntVal').innerHTML=totalInt.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2});document.getElementById('totalCostVal').innerHTML=totalCost.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2});var stepBox=document.getElementById('stepDetails');if(showSteps){stepBox.style.display='block';stepBox.innerHTML='Calculation:
Periodic Rate (r) = '+rate+'% / '+freq+' = '+(r*100).toFixed(4)+'%
Total Periods (n) = '+years+' * '+freq+' = '+n+'
Formula: P = [r*PV] / [1 – (1+r)^-n]';}else{stepBox.style.display='none';}}

Calculator Use

A 401k loan calculator is an essential tool for employees considering borrowing from their retirement savings. Unlike traditional bank loans, a 401k loan allows you to borrow from your own account and pay the interest back to yourself. This calculator helps you determine the impact of these repayments on your paycheck and total savings.

By entering your loan details, you can estimate your periodic payments (monthly, bi-weekly, etc.) and see exactly how much interest will be credited back to your account over the life of the loan.

Loan Amount
The total amount you plan to borrow. Note that IRS rules generally limit 401k loans to 50% of your vested balance or $50,000, whichever is less.
Interest Rate
The annual interest rate charged by your plan. Typically, this is the Prime Rate plus 1% or 2%.
Loan Term
The number of years you have to repay the loan. General purpose loans have a maximum term of 5 years.
Payment Frequency
How often payments are deducted from your payroll (Monthly, Bi-weekly, Weekly, or Semi-Monthly).

How It Works

The 401k loan calculator uses a standard amortization formula to calculate fixed payments. Because 401k loans are usually repaid through payroll deductions, it is important to choose the frequency that matches your pay cycle.

P = [ r * PV ] / [ 1 – (1 + r)^-n ]

  • P: Periodic payment amount
  • r: Periodic interest rate (Annual Rate / Number of periods per year)
  • PV: Present Value or Loan Amount
  • n: Total number of payment periods (Years * Frequency)

Calculation Example

Example: Suppose you want to borrow $15,000 from your 401k plan for a home improvement project. Your plan charges 9% interest, and you wish to repay it over 5 years via monthly payroll deductions.

Step-by-step solution:

  1. Loan Amount (PV) = $15,000
  2. Annual Interest Rate = 9% (0.09)
  3. Periodic Rate (r) = 0.09 / 12 months = 0.0075
  4. Total Periods (n) = 5 years * 12 months = 60 payments
  5. Calculate: P = [0.0075 * 15000] / [1 – (1 + 0.0075)^-60]
  6. Result = $311.38 per month
  7. Total Interest Paid = ($311.38 * 60) – $15,000 = $3,682.80

Common Questions

Is interest on a 401k loan a "cost"?

Technically, the interest is paid back into your own 401k account. However, there is an "opportunity cost." The money you borrow is no longer invested in the market, meaning you may miss out on potential investment gains that could have exceeded the interest rate you are paying yourself.

What happens if I leave my job?

This is the biggest risk of using a 401k loan. If you leave your employer (voluntarily or involuntarily), you usually must repay the outstanding balance by the tax filing deadline of the following year. If you cannot repay it, the balance is treated as a taxable distribution, and you may owe income tax plus a 10% early withdrawal penalty if you are under age 59.5.

Are 401k loan payments tax-deductible?

No. Unlike some mortgage interest, the interest on a 401k loan is not tax-deductible. Furthermore, you are repaying the loan with after-tax dollars, which will be taxed again when you eventually withdraw the money in retirement. This results in "double taxation" on the portion of your income used to pay the interest.

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