A TSP loan lets a current federal employee borrow from their own TSP contributions and earnings, at a fixed rate equal to the G Fund rate when the loan is approved, and repay through payroll over 1 to 5 years (general purpose) or 1 to 15 years (residential); if you leave federal service, an unpaid balance can become a taxable distribution.
Sometimes life needs money faster than a paycheck can deliver it. A car dies, a down payment comes due, a family bill lands. If you have a TSP balance, it is natural to wonder whether you can borrow from yourself instead of a bank.
You can. A TSP loan lets you take money from your own account and pay it back, with interest, to yourself through payroll. No credit check, a fixed rate, and the interest goes into your own account rather than a lender's pocket.
That sounds like a free lunch, and it is not quite one. Think of a TSP loan as borrowing a ladder from your own garage: convenient and cheap, but while it is leaning against the neighbor's house, you cannot use it to reach anything yourself. The money you borrow is out of the market until you pay it back, and if you leave federal service before it is repaid, the loan can turn into a tax bill.
This guide covers the two loan types, how much you can borrow, how the rate is set, the true costs, and what happens at separation. It is general education from FFEBA, an education organization, and not a recommendation to borrow or not.
01What is a TSP loan?
A TSP loan is money you borrow from your own TSP contributions and their earnings while you are a federal employee in pay status, repaid with interest through payroll deductions back into your account. Only your own money can be borrowed; agency automatic and matching contributions cannot.
- General purpose loanA loan for any reason, with no documentation required. Repayment term of 1 to 5 years.
- Residential loanA loan to buy or build your primary residence, with documentation required. Repayment term of 1 to 15 years.
- Loan interest rateThe G Fund rate in effect when the TSP accepts your application, fixed for the life of the loan.
- Taxable distributionWhat an unpaid loan becomes if it is not repaid by a deadline; the balance is treated as a withdrawal and taxed.
Loan types and terms are from the TSP's loan booklet and agency summaries (retrieved 2026-10-11). You can have one general purpose loan and one residential loan outstanding at the same time. After you pay off a loan, the TSP imposes a waiting period before you can take a new loan of the same type, and each new loan carries a processing fee that is deducted from the loan amount.
02What is the difference between a general purpose and a residential TSP loan?
A general purpose loan can be used for anything and repaid over up to 5 years, while a residential loan is only for buying or building your primary home and can be repaid over up to 15 years. The longer term is the main advantage of the residential loan.
| Feature | General purpose | Residential |
|---|---|---|
| Use | Any reason | Purchase or construction of your primary residence |
| Repayment term | 1 to 5 years | 1 to 15 years |
| Documentation | None | Purchase or construction documents |
| Minimum amount | $1,000 | $1,000 |
| Interest rate | G Fund rate at approval, fixed | G Fund rate at approval, fixed |
| Refinance, remodel, second home | Allowed (it is any purpose) | Not allowed |
Source: TSP loan booklet and agency TSP summaries (retrieved 2026-10-11).
03How much can I borrow from my TSP?
You can borrow at least $1,000, and at most the smallest of three limits set by the TSP and the Internal Revenue Code: your own contributions and earnings, $50,000 minus your highest outstanding loan balance in the past 12 months, or half of your vested balance (or $10,000, if that is more) minus any loan you still owe. My Account shows your exact maximum before you apply.
- Your own money only. If most of your balance is agency contributions, your maximum may be smaller than your total balance suggests.
- The 12-month look-back. If you paid off a $30,000 loan eight months ago, your $50,000 ceiling is reduced by that $30,000 for now.
- Half of vested. With a $60,000 vested balance and no loans, half is $30,000.
- Proportional from your funds. The loan comes out of your funds and your traditional and Roth balances in proportion to what you hold.
04What is the TSP loan interest rate?
The TSP loan rate is the G Fund rate in effect at the time the TSP accepts your loan application, and it stays fixed until the loan is repaid. Because the G Fund rate is reset each month by a statutory formula tied to Treasury yields, a loan taken in one month can carry a different rate than a loan taken the next.
We do not print a loan rate here because it changes monthly; the current rate is on tsp.gov. For context, the G Fund's annual return, which reflects those monthly rates, was 4.44 percent in 2025 and 1.38 percent in 2021 (derived from TSP share prices, retrieved 2026-09-10). That range shows how much the rate on a new loan can move over a few years.
A low interest rate is not the same as a low cost; the bigger cost of a TSP loan is the growth the borrowed money misses.
05How do TSP loan repayments work?
Repayments come out of every paycheck automatically, and each payment goes back into your TSP account, invested according to your current contribution allocation. You can make extra payments or pay the whole loan off at any time without a penalty.
Worked example (educational estimate on the assumptions shown). Say you take a $20,000 general purpose loan over 5 years at a hypothetical fixed rate of 4.25 percent. The payment works out to about $371 a month, or roughly $171 per biweekly paycheck. Over five years you would repay about $22,235, of which about $2,235 is interest that goes back into your own account. The rate is an assumption for illustration, not the current TSP loan rate.
- Payments start right away. Deductions begin within a pay period or two of the loan being issued.
- Missed payments have a deadline. If deductions stop, for example during leave without pay, you must make up missed payments within set limits or the loan can be declared a taxable distribution.
- Pay it off early. Extra payments shorten the loan and return money to the market sooner.
- Keep contributing. Your regular TSP contributions continue while you repay, so stopping them to afford the loan payment can also cost you agency matching contributions.
Your record, not our example
Want this run on your own numbers?
A Federal Retirement Consultant (FRC) works through your own records with you 1:1. The review is free and nothing is booked until you choose a time.
06What does a TSP loan really cost?
The real cost of a TSP loan is the market growth the borrowed money misses while it is out of your account, plus the tax effect of repaying with after-tax pay. The interest itself goes back to you, which is why the rate alone understates the cost.
Here is how the costs stack up:
- Missed growth. If your funds rise while the money is on loan, you miss that gain on the borrowed amount. In 2023, for example, the C Fund returned 26.25 percent and the G Fund 4.22 percent (derived from TSP share prices, retrieved 2026-09-10). A loan repaid at the G Fund rate would have trailed a stock-heavy mix that year. In a falling year, the reverse can happen. You cannot know in advance.
- After-tax repayment. You repay with money that has already been taxed. When the repaid amount goes into a traditional balance and is later withdrawn, it is taxed again.
- The fee. A processing fee is deducted from each new loan.
- Separation risk. If you leave federal service before repaying, the balance can become taxable income in a single year.
- Crowding out contributions. If the loan payment squeezes your budget and you cut contributions below 5 percent, you lose part of your agency match, which is often the costliest outcome of all.
07What happens to a TSP loan when I leave federal service?
When you separate, you have a limited window after the TSP is notified of your separation to repay the loan in full, reported by FedWeek and FedSmith as 90 days (retrieved 2026-10-11). Whatever is unpaid after the deadline becomes a taxable distribution, and you cannot make TSP withdrawals until the loan is closed.
- 01
Check your balance before your last day
Know the payoff amount and plan how you will cover it.
- 02
Repay in full, in part, or not at all
Within the deadline you can pay off the loan, pay part of it, or let the remaining balance be declared a taxable distribution.
- 03
Understand the tax
The taxable portion of a declared distribution is added to your income for the year. If you are under 59 and a half and did not separate in or after the year you turned 55 (50 for special provision employees), the 10 percent early withdrawal penalty may also apply (IRS Publication 721, retrieved 2026-10-11).
- 04
Then plan withdrawals
Once the loan is closed, you can set up withdrawals, installments or rollovers. Our TSP withdrawal guide covers the options.
Worked example (educational estimate on the assumptions shown). You retire at 57 with $12,000 left on a loan and decide not to repay it. The $12,000 (the traditional portion) is added to your taxable income for that year. Because you separated after the year you turned 55, the 10 percent penalty does not apply. Had you separated at 52, an extra $1,200 penalty could apply. The example assumes the whole balance is traditional money and ignores state tax.
08How do I apply for a TSP loan?
You apply online in My Account on tsp.gov, where the TSP shows your maximum loan, lets you choose the amount and term, and walks you through any spousal consent and documentation.
- 01
Confirm you are eligible
You must be a federal employee in pay status with at least $1,000 of your own contributions and earnings.
- 02
Choose the type and term
General purpose for 1 to 5 years, or residential for 1 to 15 years with documentation.
- 03
Review the payment
The TSP shows the payment per paycheck. Make sure it fits alongside at least a 5 percent contribution.
- 04
Complete consents
Married FERS participants need spousal consent; CSRS spouses are notified.
- 05
Receive the funds
The loan is paid by direct deposit or check, minus the processing fee.
09Is a TSP loan better than a hardship withdrawal?
For most short-term needs, a loan does less permanent damage than a hardship withdrawal, because loan money goes back into your account and a hardship withdrawal never does. A hardship withdrawal is also taxable and may carry the 10 percent penalty, while a loan is not taxed as long as you repay it on schedule.
| Question | TSP loan | Hardship withdrawal |
|---|---|---|
| Is it repaid to your account? | Yes, with interest | No, cannot be repaid |
| Taxed when taken? | No, if repaid on schedule | Yes, traditional money is taxed |
| 10 percent penalty under 59 and a half? | Only if it becomes a taxable distribution | May apply |
| Documentation needed? | Residential only | Yes, proof of hardship |
| Risk at separation | Unpaid balance becomes taxable | None, already taxed |
The trade-off is the separation risk. If you expect to leave federal service soon, a loan you cannot repay quickly can end up taxed anyway.
10Moving forward with a TSP loan decision
A TSP loan can be a reasonable bridge for a real need, especially if you are staying in federal service and can keep contributing at least 5 percent while you repay. It works against you when it replaces saving, when you plan to separate soon, or when it becomes a habit. The TSP hub guide explains contributions and the match, and the TSP funds guide shows how the funds the loan comes out of have behaved.
To see how borrowing might affect your long-term income, the TSP income calculator runs an educational estimate on assumptions you enter; it is not a projection or a promise.
FFEBA is an education organization. If you want someone to look at your own numbers, we can match you with a Federal Retirement Consultant (FRC), a professional trained on federal benefits. The FRC designation is listed with FINRA. The first review is free, nothing is booked until you choose a time, and you are never obligated to work with anyone we introduce. Get matched with an FRC.
11Questions federal employees ask
What is the TSP loan interest rate?
The TSP loan rate is the G Fund rate in effect when the TSP accepts your loan application, and it stays fixed for the life of the loan. The G Fund rate is reset monthly, so the rate on a new loan changes from month to month. The current figure is posted on tsp.gov.
How much can I borrow from my TSP?
The minimum TSP loan is $1,000. The maximum is the smallest of three amounts: your own contributions and their earnings (not agency money), $50,000 reduced by your highest loan balance in the past 12 months, or half of your vested balance (or $10,000 if that is more) minus any loan you still owe.
How long do I have to repay a TSP loan?
A general purpose loan is repaid over 1 to 5 years and a residential loan over 1 to 15 years, through payroll deductions. You can pay extra or pay the loan off early at any time without a prepayment penalty.
What happens to my TSP loan if I retire or quit?
When you separate, you have a limited window after the TSP is notified of your separation (reported as 90 days) to repay the loan in full. Any balance left after the deadline becomes a taxable distribution, and the 10 percent early withdrawal penalty may apply if you are under 59 and a half and do not meet an exception.
Can I use a TSP residential loan to refinance or remodel?
No. A residential loan is only for buying or building your primary residence, and the TSP asks for documentation. Refinancing, renovations and second homes do not qualify, though you could use a general purpose loan for those.
Do I need my spouse's permission for a TSP loan?
If you are a married FERS participant, your spouse must consent to the loan. If you are a CSRS participant, the TSP notifies your spouse instead.
Reviewed by the FFEBA education team. Last reviewed October 2026.
Sources
- Thrift Savings Plan loan booklet (as hosted by USDA NRCS), loan types, terms and amounts, retrieved 2026-10-11
- U.S. Bureau of Reclamation, Thrift Savings Plan new employee summary (loans), retrieved 2026-10-11
- Internal Revenue Service, Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits (for 2025 returns), retrieved 2026-10-11
- FedWeek, separation has consequences for TSP loan, retrieved 2026-10-11
- FedSmith, what happens to a TSP loan when you retire, retrieved 2026-10-11
Every government figure on this page carries its source and retrieval date. Worked examples are educational estimates on the assumptions shown, not a projection of any person's benefit. FFEBA is an education organization, not a financial advisor.
