TSP Loan Calculator

Begin by entering the details of the loan you are considering. In the "Loan Details" section, input the "Loan Amount" you wish to borrow, the current "Interest Rate" (which is the G Fund rate at the time of your application), and the "Loan Term" in years.

Next, provide information about your account in the "TSP Account" section. Enter your "Current TSP Balance" to help the calculator understand the loan's relative size. Then, input your "Expected Market Return." This is a critical input for estimating the opportunity cost—the growth your money would have earned if it had remained invested in funds other than the G Fund.

For more detailed scenarios, you can open the advanced settings. Here you can specify the "Loan Type" (General Purpose or Residential) and confirm the "Origination Fee," which is typically a fixed amount charged by the TSP.

Once all your information is entered, click "Calculate" to see a full analysis. The results will show your repayment schedule and, more importantly, the total financial impact of your decision, helping you compare a TSP loan to other financing options.

Loan Amount

This is the total dollar amount you want to borrow from your TSP account. You can generally borrow up to 50% of your vested account balance or $50,000, whichever is less. The minimum loan amount is $1,000. Entering an accurate loan amount is the first step to understanding your potential monthly payment and total costs.

Interest Rate (G Fund Rate)

The interest rate for a TSP loan is fixed for the life of the loan and is set to the G Fund's interest rate from the month your application is processed. You are essentially paying interest to yourself, as the payments go back into your own TSP account. However, this rate is often lower than the returns you could get from other TSP funds, which creates an opportunity cost.

Loan Term

This is the length of time you have to repay the loan, in years. General purpose loans have a repayment term of 1 to 5 years. Residential loans, used for the purchase or construction of a primary residence, can have a term of up to 15 years. A shorter term means a higher monthly payment but less total interest and opportunity cost.

Current TSP Balance

Your total vested balance in your Thrift Savings Plan. This figure is used to calculate the potential opportunity cost of the loan. When you borrow, the loan amount is removed from your investment mix, meaning that portion of your balance is no longer growing at your expected market rate. A larger loan relative to your balance has a more significant impact.

Expected Market Return

This is the average annual rate of return you expect your TSP investments to earn if the money remained in your account instead of being borrowed. This is a crucial assumption for calculating opportunity cost. For example, if your loan interest rate is 4% but your investments typically earn 8%, the opportunity cost is the 4% difference you miss out on each year. A common long-term stock market average is 7-10%, but you should use a number that reflects your personal investment allocation (e.g., C, S, I, F, L Funds).

Loan Type

The TSP offers two types of loans. A General Purpose loan can be used for any reason and must be repaid within 5 years. A Residential loan is specifically for the purchase or construction of a primary residence and can be repaid over a period of up to 15 years. Residential loans require documentation. This calculator defaults to General Purpose.

Origination Fee

The TSP charges a one-time, non-refundable processing fee for each loan, which is deducted from the loan proceeds. As of the latest TSP guidance, this fee is $50. This fee is part of the direct cost of your loan, along with the interest you pay.

This calculator determines the true cost of a TSP loan by analyzing both its direct and indirect costs.

The direct cost is straightforward: it includes the total interest you pay over the life of the loan plus the one-time origination fee. The calculator uses a standard amortization formula to determine your fixed monthly payment based on the loan amount, interest rate, and term.

The indirect, and often larger, cost is the opportunity cost. When you take a loan, that money is removed from your investment funds and can no longer generate market returns. To calculate this, the calculator runs two parallel projections:

1. Balance Without Loan: It projects your current TSP balance growing year-by-year at your "Expected Market Return."
2. Balance With Loan: It projects your TSP balance after subtracting the loan amount. This reduced balance grows at the market return. Your loan repayments (both principal and interest) are added back into your account, but this money only earns the G Fund rate, not your expected market return.

The opportunity cost is the difference between the final projected balance in these two scenarios. The "Total True Cost" is the sum of the total interest paid, the origination fee, and this calculated opportunity cost. This provides a comprehensive view of what borrowing from your retirement savings will actually cost you.

The calculator uses several formulas to estimate the costs and impact of a TSP loan. The logic is presented here in plain English.

Monthly Payment

The monthly payment is calculated using the standard formula for an amortizing loan.

monthly_rate = annual_interest_rate / 100 / 12
total_months = loan_term_years * 12
monthly_payment = (loan_amount * monthly_rate * (1 + monthly_rate)^total_months) / ((1 + monthly_rate)^total_months - 1)

Total Interest and Direct Cost

The total amount paid is the monthly payment multiplied by the number of months. The interest is the difference between the total paid and the original loan amount, plus the fee.

total_paid = monthly_payment * total_months
total_interest = total_paid - loan_amount + origination_fee

Opportunity Cost Projection

The calculator projects two balances year by year to find the opportunity cost.

# Year 0
balance_with_loan = current_tsp_balance - loan_amount
balance_without_loan = current_tsp_balance

# For each year in the projection:
# Scenario 1: No Loan
balance_without_loan = balance_without_loan * (1 + expected_market_return / 100)

# Scenario 2: With Loan
annual_payments = monthly_payment * 12
  
if year < loan_term_years:
  # During repayment, the reduced balance grows and payments are added back
  balance_with_loan = (balance_with_loan * (1 + expected_market_return / 100)) + annual_payments
else:
  # After repayment, the full balance grows at the market rate
  balance_with_loan = balance_with_loan * (1 + expected_market_return / 100)

# After the full projection period (loan term + 5 years):
opportunity_cost = final_balance_without_loan - final_balance_with_loan

Total True Cost

The total true cost combines the direct costs (interest and fee) with the indirect opportunity cost.

total_true_cost = total_interest + opportunity_cost

Borrowing from your own retirement savings is a significant decision. Understanding the advantages and disadvantages is essential before you proceed.

Pros of a TSP Loan

• Low Interest Rate: The interest rate is tied to the G Fund, which is typically much lower than rates for personal loans or credit cards.
• You Pay Yourself Back: The interest you pay goes directly back into your own TSP account, not to a bank or lender.
• No Credit Check: Your credit score is not a factor in your eligibility for a TSP loan. Approval is based on your account status and balance.
• Convenience: The application process is relatively simple and integrated within the TSP system.

Cons of a TSP Loan

• Opportunity Cost: This is the biggest drawback. The money you borrow is no longer invested in the market, meaning you miss out on all potential compound growth. As this calculator shows, this hidden cost can be larger than the interest you pay.
• Repayment is Mandatory: Loan payments are automatically deducted from your paycheck. If you leave federal service, you must repay the loan in full, typically within 90 days.
• Tax Consequences if You Default: If you cannot repay the loan after leaving your job, the outstanding balance is treated as a taxable distribution. If you are under age 59½, you will also owe a 10% early withdrawal penalty. This can be a very expensive outcome.
• Reduced Retirement Savings: A loan temporarily stunts the growth of your nest egg. It reduces the power of compounding and can leave you with a smaller balance at retirement than you would have had otherwise.
• Double Taxation: You repay the loan with after-tax dollars. When you later withdraw that same money in retirement, it will be taxed again as ordinary income.

The Thrift Savings Plan has specific rules governing loans. It's important to know these before you apply.

• Maximum Loan Amount: You can borrow the lesser of:
  1. 50% of your total vested TSP account balance.
  2. $50,000. The total amount of all your TSP loans cannot exceed this limit.
• Minimum Loan Amount: The minimum you can borrow is $1,000.
• Loan Types and Terms:
  • General Purpose Loan: Repayment term is 1-5 years. You do not need to provide a reason for the loan.
  • Residential Loan: Repayment term is 1-15 years. This loan must be for the purchase or construction of your primary residence, and you must provide documentation.
• Number of Loans: You can only have two outstanding TSP loans at any one time. Only one of these can be a residential loan.
• Spousal Consent: If you are a FERS or Uniformed Services employee and are married, your spouse must formally consent to the loan, even if you are separated. This rule does not apply to CSRS employees.
• Waiting Period: After you repay a TSP loan in full, you must wait 60 days before you can apply for another loan of the same type.
• Contribution Suspension: Taking a TSP loan does not affect your ability to make contributions to your account. This is a positive change from old rules that required a suspension of contributions. Be sure to continue contributing to get your full agency match from the TSP match calculator.

Before borrowing from your retirement future, consider other options that may have a smaller long-term impact on your financial goals.

• Personal Loan: An unsecured personal loan from a bank or credit union may have a higher interest rate, but it doesn't involve opportunity cost. The interest you pay goes to the lender, but your retirement savings remain fully invested and growing.
• Home Equity Line of Credit (HELOC): If you are a homeowner, a HELOC often has a competitive interest rate and the interest may be tax-deductible. However, your home is used as collateral, which adds risk.
• 0% APR Credit Card: For short-term financing needs, a promotional 0% APR credit card can be a good option if you are certain you can pay off the balance before the introductory period ends. If not, the interest rate can become very high.
• Negotiating a Payment Plan: If the loan is for a large expense like medical bills or tuition, contact the provider to see if you can arrange a payment plan. This can often be done with little or no interest.
• Building an Emergency Fund: The best alternative is proactive. Having 3-6 months of living expenses saved in a high-yield savings account prevents the need to borrow for unexpected costs in the first place. This should be a priority in your retirement planning for beginners journey.

The calculator provides several key metrics to help you understand the full cost of your TSP loan.

• Loan Impact Score: This score gives you a quick summary of the loan's financial impact. A high score (e.g., 80-100) indicates a relatively low true cost compared to the loan amount. A low score (e.g., below 50) signals that the opportunity cost is significant and you should carefully consider alternatives.
• Monthly Payment: This is the fixed amount that will be deducted from your paycheck to repay the loan. Ensure this payment fits comfortably within your budget.
• Total Interest: This is the total amount of interest you will pay back into your own account over the life of the loan, plus the origination fee. While you are paying yourself, it's still a useful metric for comparison.
• Opportunity Cost: This is the most critical result. It represents the estimated investment growth you will lose by taking money out of your TSP funds. A high opportunity cost means the loan is significantly hindering your retirement savings.
• Total True Cost: This is the sum of the Total Interest and the Opportunity Cost. It is the most comprehensive measure of what the loan is costing you, both directly and indirectly.
• TSP Balance Comparison Chart: This visual chart is powerful. The gap between the "Without Loan" line and the "With Loan" line represents your lost growth (opportunity cost). The longer the loan term and the higher your expected return, the wider this gap will become.

If you must take a TSP loan, there are ways to minimize its negative impact on your retirement savings.

• Borrow Only What You Need: The smaller the loan, the lower the interest and the smaller the portion of your balance that misses out on market growth.
• Choose the Shortest Possible Term: A shorter repayment period means you pay less total interest and your money gets back to being fully invested sooner, reducing the overall opportunity cost. Use the calculator to see how a 3-year term compares to a 5-year term.
• Continue Your Contributions: Never stop contributing to your TSP while you have a loan. At a minimum, contribute enough to get your full agency or service matching contributions. Missing the match is like turning down free money and compounds the negative effect of the loan.
• Accelerate Repayment (If Possible): You can make additional payments to pay off your loan faster. This reduces the total interest and opportunity cost.

1. Ignoring Opportunity Cost: The biggest mistake is focusing only on the low interest rate and forgetting about the lost compound growth. This is the hidden cost that this calculator is designed to reveal.
2. Using It for Discretionary Spending: A TSP loan should be reserved for genuine emergencies or essential needs, not for vacations, cars, or other wants. Borrowing from your future self for today's desires is a dangerous financial habit.
3. Not Understanding the "Leaving Service" Rule: Many federal employees are unaware that if they leave their job for any reason (resignation, termination, or retirement), the loan becomes due in full. Failure to repay triggers taxes and penalties, which can be a nasty surprise.
4. Taking a Residential Loan and Extending the Term: While a 15-year term is available for residential loans, it dramatically increases the total interest and opportunity cost. Your money is out of the market for a very long time.
5. Thinking "I'm Paying Myself Back" Means It's Free: While the interest does go to your account, you are repaying the loan with after-tax money, and the growth you missed out on is gone forever. It is not a "free" loan.