401(k) Loan Calculator

Borrowing from your 401(k) feels like the cheapest loan there is: you're paying yourself interest. But the real cost is hidden. While the borrowed money is out of the market, it stops compounding, and that foregone growth often dwarfs the interest you're paying yourself.

Before you commit, check how this payment affects your debt-to-income ratio.

This calculator amortizes the loan you repay to your own account, then compares two fixed benchmarks: what that money would have grown to if it had stayed invested, versus what it grows to inside the 401(k) while the loan is outstanding. The gap between them is the loan's real cost.

How does this calculator work?

Enter the amount you want to borrow, the interest rate you'll pay back to your own account, and the repayment term in years. The calculator computes the fixed monthly payment (rounded to the nearest dollar, matching how most plan administrators quote it) and builds the full amortization schedule.

Click Show Additional Fields to reveal three more inputs. Extra Monthly Payment adds extra principal each month to pay the loan off faster, and fills the data table's Extra Annual Payment column (which you can also edit row by row for an uneven payoff plan). 401k Interest Rate is what you expect your 401(k) to earn on average going forward; Loan Investment Rate is what you'd expect from investing that same money outside the 401(k) instead. Both default to 5% and 6%, and both drive the Investment vs. 401K comparison.

The FV of Investment and FV of 401K columns project the original loan amount forward at those two rates, independent of any extra payments, so the comparison always answers the same question: what did taking this loan cost you, versus leaving the money invested?

Worked example

Borrow $50,000 from a 401(k) at 7%, repaid over 10 years.

Loan amount

$50,000

Rate / term

7% / 10 yrs

Monthly payment

$581

Total repaid (to self)

$69,641

If left invested at 6%

$84,474

401(k) balance at 5% (with loan out)

$77,566

Gap (the loan's real cost)

$6,908

How the numbers work

The $581 payment is the amortization result for $50,000 at 7% over 120 months, rounded to the nearest dollar the way plan administrators quote it. Over 10 years that adds up to $69,641 repaid: the $50,000 principal plus $19,641 of interest paid to yourself.

Left invested at the default 6% Loan Investment Rate, that same $50,000 would grow to $84,474 over 10 years. Modeled at the default 5% 401k Interest Rate instead, it reaches $77,566. The $6,908 gap between those two figures is the real cost of the loan: money the account would have had if you hadn't borrowed against it, separate from and larger than the $19,641 of interest you can see yourself repaying.

That gap is why a 401(k) loan is rarely truly “free.” It can still beat 20%+ credit card debt, but compare it against the opportunity cost shown here, not just the loan rate.

The job-change risk

The biggest danger of a 401(k) loan isn't the interest. It's what happens if you leave or lose your job. Many plans require the outstanding balance to be repaid quickly, and unpaid balances become taxable distributions. Before age 59½ that usually means income tax plus a 10% early-withdrawal penalty on top of it.

Because of this, a 401(k) loan is safest when your employment is stable and the term is short. If there's a real chance you'll change jobs before repaying, the risk often outweighs the convenience.