Most 401(k) retirement plans allow employees to borrow money from their accounts, generally up to half of your vested account balance, or a maximum of $50,000.
Some plans may even allow you to have more than one loan outstanding. But before you take out a loan on your plan, consider the advantages and disadvantages associated with this transaction.
Cash may be readily available. Most plans are very flexible and allow you to borrow money for any reason. Check with your employer or human resources contact for a list of your plan’s rules, since some plans do have more stringent restrictions.Usually, getting a loan is as easy as calling your plan’s 800 telephone number and others can require paperwork on your behalf.
You pay the interest back into your account. You will be required to pay your account back through automatic deductions from your pay or bank account, or through coupon payments (as allowed by your plan), and the money goes back into your own account.
The interest rate charged for a loan from your 401(k) is usually lower than bank rates - check with your human resources to verify the rate.
Repayment is easy. Most plans require your payments to come directly out of your paycheck, which makes it easy to repay the loan.