Wealthy PotTSP Loan Rules: How Much You Can Borrow, What It Costs, and What Happens If You Leave
A TSP loan lets an active federal employee or service member borrow between $1,000 and $50,000 of their own contributions and earnings, then repay it with interest through payroll deduction. The interest rate is the G Fund rate and stays fixed for the life of the loan. The one-time fee is $50 for a general purpose loan or $100 for a primary residence loan. The interest goes back into your own account, but the money you borrow stops growing, and if you leave federal service without repaying it, the unpaid balance becomes taxable income. Here are the rules from the TSP and the federal regulations, with a worked example of the true cost.
Table of Contents
The Short Answer
| Rule | General purpose loan | Primary residence loan |
|---|---|---|
| Use | Anything, no paperwork | Buying or building your main home; documents required |
| Repayment term | 12 to 60 months | 61 to 180 months |
| Fee | $50 | $100 |
| Minimum | $1,000 | |
| Maximum | Smallest of three tests, never more than $50,000 | |
| Interest rate | G Fund rate when you apply, fixed for the loan | |
| Loans at once | Two per account, at most one of them residential | |
| Wait after payoff | 30 business days before a new loan | |
Source: tsp.gov TSP loans page; 5 CFR part 1655; TSP booklet Loans (January 2026).
Two Types of TSP Loan
General purpose loans can be used for anything and need no documentation. You choose a term of 12 to 60 months.
Primary residence loans are only for the future purchase or construction of your main home, and only for costs still needed to close, such as the down payment or settlement costs. You have 30 days after applying to send the documents. The term runs 61 to 180 months (5 to 15 years). The TSP will not make a residential loan to refinance or pay down a mortgage, renovate or add on, buy out a co-owner, buy land only, or reimburse earnest money you already paid. A TSP residential loan is not a mortgage, so its interest is not tax deductible. If you are weighing it against a bigger down payment from savings, our guide to the average down payment sets out the numbers lenders look at.
How many at once: up to two outstanding loans per account, and no more than one of them can be a residential loan. Two general purpose loans at the same time are allowed. If you have both a civilian and a uniformed services TSP account, each account has its own two-loan limit, but two of the three dollar-limit tests below count both accounts together.
Who Can Borrow
All of the following must be true:
- You are a current federal civilian employee or member of the uniformed services. Separated and retired participants and beneficiary account holders cannot take new loans.
- You are in pay status, because repayments come out of your paycheck. During a government shutdown, furloughed and excepted employees can still apply.
- You have at least $1,000 of your own contributions and their earnings in the account. Agency contributions (the 1% automatic and the match) cannot be borrowed, and neither can money in the mutual fund window.
- You have not paid off a TSP loan in full within the past 30 business days.
- There is no court order, such as a divorce or child support order, holding your account.
Spousal consent: if you are married and covered by FERS or are a member of the uniformed services, your spouse must consent by signing the loan agreement. If you are under CSRS, the TSP notifies your spouse instead. Consenting does not make your spouse responsible for repaying the loan. Exceptions are possible only if the spouse's whereabouts are unknown or in exceptional circumstances.
How Much You Can Borrow
The maximum is the smallest of three tests set in 5 CFR 1655.6:
- Your own contributions and earnings in the account, minus any loan you already owe.
- 50% of your own contributions and earnings (counting any outstanding loan), or $10,000 if that is more, minus any outstanding loan balance.
- $50,000 minus your highest outstanding loan balance at any point in the last 12 months.
Hypothetical examples, assuming no loans in the past year:
| Your own money in the TSP | Test 1 | Test 2 | Test 3 | Maximum loan |
|---|---|---|---|---|
| $15,000 | $15,000 | $10,000 | $50,000 | $10,000 |
| $60,000 | $60,000 | $30,000 | $50,000 | $30,000 |
| $200,000 | $200,000 | $100,000 | $50,000 | $50,000 |
The third test catches people who pay a loan off and borrow again. The TSP's own example: take a $35,000 loan, repay it in full within 12 months, and the most you can borrow for the rest of that 12-month window is $15,000, even though the money is back in your account. Your exact maximum changes daily with your balance and is shown in My Account.
Interest and Fees
Interest. Under 5 CFR 1655.7 the rate is the monthly G Fund rate in effect on the 15th of the month before you apply, and it stays fixed until the loan is repaid. The G Fund rate follows the average yield on Treasury notes and bonds with four or more years to maturity, so it moves with longer-term interest rates. For context, the G Fund returned 4.51% over the 12 months to September 30, 2026. Check the current loan rate in My Account before you apply. One exception: a civilian who enters active military duty can ask to have the rate capped at 6% for the period of service.
Fee. $50 for a general purpose loan, $100 for a residential loan, taken out of the loan proceeds and never returned to your account. Borrow $5,000 and you receive $4,950. You cannot pay the fee separately.
Not deductible. TSP loan interest is not tax deductible, even on a residential loan.
Repaying the Loan
- Payments come out of every paycheck by payroll deduction and must start within 60 days of disbursement. Check your leave and earnings statement: you are responsible for payments even if your agency fails to deduct them.
- Repayments go back into your traditional and Roth balances in the same proportions the loan came out, and are invested according to your current investment election.
- You can make extra payments or pay the whole loan off at any time with no prepayment penalty.
- Miss two or more payments and do not catch up by the TSP's deadline, or fail to finish by the maximum term, and the remaining balance becomes a taxed loan. It is reported as income, and if you are under 59½ a 10% early withdrawal penalty may apply. An unpaid taxed loan still counts as one of your two loans and permanently lowers your balance unless you repay it before you separate.
- If you go into approved nonpay status, payments are suspended for up to one year (longer for military service), but interest keeps building.
Before you borrow, make sure the payment does not push you to cut your contributions. Under FERS or the Blended Retirement System, dropping below 5% means losing part of the agency match, which is a guaranteed return you will not get back.
If You Leave Federal Service
Separating with a loan outstanding is the main risk with a TSP loan. You have three options:
- Keep paying by check, money order or direct debit, within the original maximum term.
- Pay it off in full.
- Let it be foreclosed. If you do not start payments or repay in full by the deadline in the TSP's notice, the balance plus accrued interest is treated as a distribution and taxed as income.
The 10% early withdrawal penalty applies to a foreclosure unless you turn 55 or older in the year it is declared. For public safety employees the age is 50, or 25 years of service. After separating you cannot repay a foreclosed loan to the TSP. You can, however, roll the taxable amount over to an IRA or eligible plan using other money, if you do it by your tax-filing deadline (including extensions) for that year.
Hypothetical example: you leave at age 50 (not in a public safety job) with $15,000 still owed and let it foreclose. In the 22% federal bracket that is about $3,300 in income tax plus a $1,500 penalty, or $4,800, before any state tax. See the 2026 tax brackets for your own rate. If you might leave within the loan term, a shorter term or a smaller loan reduces this risk.
The Real Cost: A Worked Example
"You pay the interest to yourself" is true, but it leaves something out. The money you borrow earns only the loan interest you pay back, not what your funds would have earned.
Hypothetical: a $20,000 general purpose loan over 5 years, 26 paychecks a year, at an assumed 4.5% rate.
- Payment: about $172 per paycheck (130 payments).
- Total interest paid back into your account: about $2,352.
- Cash received after the $50 fee: $19,950.
| If the money would have earned | Value after 5 years without the loan | Value of loan repayments, reinvested | Cost of borrowing |
|---|---|---|---|
| 7% a year (hypothetical stock-heavy mix) | $28,051 | $26,563 | about $1,490 |
| 4.5% a year (about the loan rate) | $24,924 | $24,981 | about $0 |
Our arithmetic. Hypothetical rates of return, not projections. Ignores the $50 fee and taxes; assumes repayments are invested at the same return.
If you hold mostly the G Fund, borrowing costs you little beyond the fee. If you hold mostly stocks, the cost depends on what markets do while the money is out. You lose most when the market rises sharply during the loan, and lose less, or even come out ahead, if it falls. Compare that with other ways to cover the expense: an emergency fund carries no fee, no payroll deduction and no tax risk if you change jobs. For how the TSP compares with other plans' loan rules, see our 401(k) guide and the TSP vs 401(k) vs IRA comparison. Our TSP calculator shows the long-run effect of a lower balance on your retirement.
Sources & Methodology
- TSP, TSP loans (page updated September 14, 2026), for loan types, fees, eligibility, limits and separation options.
- TSP booklet Loans (TSPBK04, January 2026), for the number of loans, spousal rights, delinquency, foreclosure, penalty exceptions and the $35,000 example.
- 5 CFR part 1655, Loan Program, sections 1655.2 (eligibility), 1655.4 (number of loans), 1655.5 (terms), 1655.6 (amounts), 1655.7 (interest), 1655.15 (taxed loans and foreclosures), 1655.18 (spousal rights) and 1655.21 (fee).
- Summary of the TSP (TSPBK08, January 2026), for the 30-business-day waiting period and the agency match.
- TSP, Rates of return, for the G Fund's 12-month return to September 30, 2026.
Method notes. The payment, interest and opportunity-cost figures are our own amortization of a hypothetical loan with 26 equal payments a year; the TSP calculates interest daily, so actual payments differ slightly. Tax figures are illustrative and ignore state tax and any Roth portion of the loan.
This article is for general information and is not financial or tax advice. Figures are from tsp.gov, TSP publications and 5 CFR part 1655, checked against the primary sources on 2026-10-04. The loan interest rate changes monthly; confirm your rate, maximum and payment in My Account before borrowing.
FAQ
How much can I borrow from my TSP?
At least $1,000 and at most the smallest of: your own contributions and earnings; 50% of them or $10,000, whichever is more, minus any loan balance; and $50,000 minus your highest loan balance in the past 12 months.
What is the TSP loan interest rate?
The G Fund rate in effect on the 15th of the month before you apply, fixed for the life of the loan. It changes monthly, so check My Account for the current figure.
How long do I have to repay a TSP loan?
12 to 60 months for a general purpose loan and 61 to 180 months for a primary residence loan. You can pay it off early with no penalty.
Can I have two TSP loans at once?
Yes. You can have two loans per account, but only one can be a primary residence loan. Two general purpose loans at the same time are allowed.
How long do I have to wait after paying off a TSP loan?
30 business days before you can apply for another loan of either type.
Does my spouse have to sign for a TSP loan?
Yes if you are married and covered by FERS or are in the uniformed services. Under CSRS the TSP notifies your spouse instead. Your spouse does not become responsible for the debt.
What happens to my TSP loan if I retire or quit?
You can keep paying by check, money order or direct debit, or pay it off. If you do neither by the deadline in the TSP's notice, the balance is foreclosed and taxed as income. A 10% penalty may apply unless you turn 55 or older that year (50 for public safety employees).
Can I take a TSP loan after I retire?
No. New loans are only for current employees and service members in pay status.
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"TSP Loan Rules: How Much You Can Borrow, What It Costs, and What Happens If You Leave." Wealthy Pot, 2026. https://wealthypot.com/tsp-loan/
