TSP Loans: Loan Basics

When you take a TSP loan, you borrow from your TSP account. The amount of your TSP loan cannot exceed the amount of your own contributions and earnings from those contributions. So, if you work under the Federal Employees' Retirement System (FERS), you cannot borrow from any agency contributions or earnings from those contributions.

If you meet the loan eligibility rules and your loan request is approved, the loan amount is removed from your TSP account. You must repay your loan with interest. Repayments for the loan and interest are generally made through payroll deductions. Your repayments restore the amount of your loan, plus interest, to your account.

The TSP allows two types of loans.

General Purpose

• May be used for any purpose
• Requires no documentation
• Has a repayment term of 1 to 5 years

Residential

• May only be used for the purchase or construction of a primary residence
• Requires documentation
• Has a repayment term of 1 to 15 years

For details, visit Residential Loan Documentation.

General Eligibility Rules

If you have both a civilian account and a uniformed services account, the loan eligibility rules apply to the TSP account from which you intend to borrow.

To be eligible for a loan, you:

• Must be employed by the Federal Government or a member of the uniformed services.
• Must be in pay status because repayments are set up as payroll deductions.
• Can only have one outstanding general purpose loan and one outstanding residential loan from any one TSP account at a time.
• Must have at least $1,000 of your own contributions and earnings in your TSP account (agency contributions and earnings cannot be borrowed).
• Must not have repaid a TSP loan of the same type in full within the past 60 days. (If you have both a civilian TSP account and a uniformed services TSP account, the 60-day waiting period applies separately to each account.)
• Must not have had a taxable distribution of a loan within the past 12 months unless it was the result of your separation from Federal service.
• Must not have a court order against your TSP account.

Residential Loan Eligibility Rules

Residential loans have specific rules in addition to the general eligibility rules:

• A residential loan can only be used for purchasing or constructing a primary residence, which may be any of the following:
  • House
  • Townhouse
  • Condominium
  • Shares in a cooperative housing corporation
  • Boat
  • Mobile home
  • Recreational vehicle
• A residential loan cannot be used for:
  • Refinancing or prepaying an existing mortgage
  • Construction of an addition to an existing residence
  • Renovations to an existing residence
  • Buying out another person's share in the borrower's current residence
  • The purchase of land only
• The borrower's primary residence must be purchased in whole or in part by you, or your spouse, if you are married.

Minimum Loan Amount

The minimum TSP loan amount is $1,000.

The amount of your account balance that consists of your own contributions and earnings on those contributions, must be at least equal to the minimum loan amount.

Maximum Loan Amount

The maximum loan amount is the smallest of the following:

• Your own contributions and earnings on those contributions in the TSP account from which you intend to borrow, not including any outstanding loan balance;
• 50% of your vested account balance (including any outstanding loan balance) or $10,000, whichever is greater, minus any outstanding loan balance; or
• $50,000 minus your highest outstanding loan balance, if any, during the last 12 months. Even if the loan is currently paid in full, it will still be considered in the calculation if it was open at any time during the last 12 months.

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.

Direct Costs

Loan Fee.   The TSP charges a loan fee of $50 for administrative expenses. The TSP deducts the fee from your loan proceeds. For example, if you request a loan for $1,000, the amount paid to you will be $950.

Interest.   The interest rate on your TSP loan is the G Fund rate at the time your loan application is processed. This rate is fixed for the life of the loan. Although TSP loan interest is not tax-deductible, all of the interest goes back into your TSP account.

Indirect Costs

Indirect costs include sacrificed earnings. When you take a TSP loan, you sacrifice the earnings that might have accrued on the borrowed money, had it remained in your TSP account.

Although you pay the loan amount back to your TSP account with interest, the amount of interest paid may be less than what you might have earned if the money had remained in your TSP account.