401(k) Loan Calculator

How to calculate 401(k) loan calculator?

This calculation finds the monthly payment and total cost for a 401(k) loan using the loan amount, annual interest rate, and loan term in years.

Key formula: monthly_payment = P * r / (1 - (1 + r)^-n) where r = annual_rate / 12

Using the 401(k) loan calculator calculator: an example

Example values: Loan = $10,000; APR = 5%; Term = 5 years (60 months).

Step-by-step calculation:

1. Convert APR to monthly rate: r = 5% / 12 = 0.0041667.
2. Compute number of payments: n = 5 × 12 = 60.
3. Apply the formula: monthly = 10000 × 0.0041667 / (1 − (1+0.0041667)^−60) ≈ $188.71.
4. Total repaid = $188.71 × 60 ≈ $11,322; Total interest ≈ $1,322.

Frequently Asked Questions

Can I borrow the full balance of my 401(k)?

Many plans restrict loan amounts, commonly to 50% of your vested balance or a $50,000 cap. Check your specific plan rules or contact the plan administrator.

How does borrowing affect my retirement savings?

A loan reduces the amount invested and potential market returns while funds are borrowed. Although repayments restore the account, lost growth during the loan period can reduce long-term savings.

What happens if I leave my job?

If you leave your employer, the outstanding loan balance may become due quickly. If not repaid, it can be treated as a distribution and subject to taxes and possible penalties.