This means you should end up with more in the account than what you initially took out.Īlthough the interest you pay goes back into your account, it’s still less than what you could earn by investing your money in another fund. That’s a major difference between TSP loans and other loan types: normally, the lender pockets the interest, but in this case, you pay the interest to yourself. That means you’re borrowing from the money you’ve already saved (in your TSP), and you pay it back to yourself-with interest (currently 1.125%). When you take out a TSP loan, you’re essentially acting as your own lender. However, you can still use your loan to cover closing costs or even your down payment, which can allow you to buy more home than you might otherwise be able to do. is $355,900, a TSP loan will hardly buy you a decent home in most areas. Given that the median home price in the U.S. You can’t borrow more than $50,000 minus the amount of any TSP loans you’ve taken out in the past year.You can’t borrow more than 50% of your vested account balance or $10,000, whichever is more.You can’t borrow more than you’ve contributed to the account, plus earnings.The maximum amount you can borrow is limited by the following rules: The minimum amount you can borrow with a TSP loan is $1,000. It’s important to keep in mind, though, that the interest rate you’ll pay yourself is likely less than what you could earn elsewhere, like in the stock market or another interest-bearing account. Your TSP plan administrator handles all of the back-end work for you, such as sending out the loan funds and putting them back in your account as you pay it back over time. Treasury securities with at least 4 years to maturity-to your own account. In this case, you essentially act as your own lender, and you make payments back-with interest (currently 1.125%) that fluctuates depending on the average yield of all U.S. TSP loans let you borrow some of the money you have in your TSP account. Term lengths range from one to five years. These are much like personal loans, and you can use them for just about anything. You aren’t able to use residential TSP loans for refinancing, remodels or buying land by itself, although you could use a general TSP loan for these things. TSP states this can include homes, condos and even RVs or boats. You can use these to help pay for building or buying your primary residence. However, there are multiple types of TSP loans, including: What Is a TSP Loan?Ī TSP loan is similar to a 401(k) loan-which lets you draw money against your retirement account-but designed specifically for federal employees. There are a lot of other considerations too, and we’ll walk you through them to help you understand if TSP loans are right for you. TSP loans are especially well-suited if you’re absolutely certain you’ll remain a federal employee until you pay off your loan. There’s a lot to like about TSP loans, but there are also some big downsides you should know about. If you fall into this category and need to borrow money, you may be familiar with a TSP loan that lets you borrow against your retirement savings. The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services.
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