How to Take a TSP Loan: Eligibility, Interest, and Repayment

To take a Thrift Savings Plan loan, log into My Account on tsp.gov, choose either a general-purpose or primary residence loan, pick your amount and repayment term, and submit direct deposit information. If you qualify and everything is in order, the money typically lands in your bank account within three business days. You’re borrowing from your own retirement balance and paying yourself back with interest through payroll deductions, so the mechanics are simple, but the rules around eligibility, spousal consent, and what happens if you leave federal service can turn a routine loan into an expensive mistake.

Who Qualifies

Four conditions have to be met before the TSP will process a loan request. You must be in active pay status as a federal employee or uniformed service member. You must be eligible to contribute to the TSP. Your account needs at least $1,000 in employee contributions and their associated earnings; agency automatic and matching contributions don’t count toward that threshold. And at least 30 business days must have passed since you last paid off a TSP loan.¹

That 30-day waiting period catches people off guard. If you paid off a general-purpose loan last week and immediately need a residential loan, you have to wait. Government shutdowns are the one exception: furloughed participants and those excepted from furlough can apply even while technically not in pay status.¹

Loan Types and How Much You Can Borrow

The TSP offers two loans. A general-purpose loan can be used for anything, requires no documentation, and is repaid over 12 to 60 months. A primary residence loan is only for buying or building a home you will live in, is repaid over 61 to 180 months, and requires supporting documentation.²

You can have up to two loans outstanding at a time, but only one of them can be a residential loan. Two general-purpose loans at once is fine. One of each is fine. Two residential loans is not. If you have both a civilian account and a uniformed services account, the limits apply separately to each. A loan that has been declared taxable but not paid off still counts as an outstanding loan.²

The minimum you can borrow is $1,000.² The maximum is the smallest of three figures:

Your available employee balance, meaning employee contributions and their earnings minus any outstanding loan principal.
The greater of 50% of your vested employee balance or $10,000, minus any outstanding loan balance.
$50,000 minus the highest outstanding loan balance you carried at any point during the previous 12 months.

That third figure trips up people who recently paid off a loan. If you had a $30,000 balance eight months ago, your current ceiling drops to $20,000 regardless of what you’ve paid down since.³ The $10,000 floor works the other direction: even if half of your vested balance is less than $10,000, you can still borrow up to $10,000 as long as you have enough employee contributions to cover it.⁴

Interest Rate and Fees

Your interest rate is the G Fund rate set by the Department of the Treasury on the 15th of the month before you submit your request. That rate stays fixed for the life of the loan and does not change if G Fund returns shift later. If the loan is reamortized, the original rate carries over.⁴ G Fund rates have hovered around 4% to 4.25% through early 2026.

Because the interest is paid back into your own account, the actual cost of a TSP loan is not the interest itself. It’s the market returns you miss on the money while it sits outside your invested balance. If your C Fund or S Fund holdings would have earned 10% during the repayment period and your loan rate is 4%, that gap is your real cost.

The TSP also charges a one-time processing fee that is deducted from the loan proceeds: $50 for a general-purpose loan and $100 for a primary residence loan. The fee is never refunded, even if you pay the loan off early.⁵

How to Apply

Log into My Account on tsp.gov and go to the loan request section. The portal walks you through choosing a loan type, entering the dollar amount, picking a repayment term, and providing bank routing and account information for direct deposit.

Before you start, make sure your mailing address and any direct deposit information have been on file for at least seven days. The TSP will not send funds to a destination added fewer than seven days before the request. That’s a security measure, not a glitch.²

General-purpose loans can usually be completed online in a single session with no documentation. A residential loan requires more: you’ll need to upload a signed purchase contract or construction agreement showing total costs and closing date, with your name listed as the buyer or builder of the primary residence. The TSP must receive that documentation within 30 days of your loan request.⁶

The final screen shows a summary of your loan terms, the interest rate, and the projected repayment schedule. Once you submit, the system generates a confirmation number. If it detects missing spousal signatures or incomplete forms, it will prompt you to download a PDF for physical execution, which may require notarization or a witness signature depending on your account type.

Spousal Consent

The spousal rules depend on your retirement system. If you’re a CSRS participant, the TSP sends a notification to your current spouse that you’ve applied for a loan, but you don’t need their signature. If you’re a FERS participant or a member of the uniformed services, your spouse must provide written consent before the loan can be disbursed.⁷

When the Money Arrives

Once the TSP has all required forms, administrators verify your balance, confirm compliance with plan rules, and calculate how many shares to liquidate from each of your investment funds at the next available closing price.

If everything was submitted electronically, the loan is generally disbursed within three business days. Direct deposit is fastest. If you don’t provide valid direct deposit information, the TSP mails a paper check to your address on record, which takes longer and carries more risk: a lost or misdirected check can take six weeks or more to replace.² You can track disbursement status in the transaction history in your online account, where a “paid” or “disbursed” status will appear along with the locked-in interest rate.

How Repayment Works

Loan repayments come out of your after-tax pay each pay period automatically. Your payroll office receives instructions on the dollar amount and frequency based on your pay cycle. Each payment covers both principal and interest, and the interest goes back into your TSP account.⁴

You can pay off the loan early at any time through the online portal using a linked bank account. A balloon payment covering the remaining principal and accrued interest can be calculated in your account. Paying early cuts short the period your money is sitting outside the market, which is the real financial drag of carrying a TSP loan.

If you transfer between federal agencies, your gaining agency’s payroll office should continue the deductions without interruption. It’s worth confirming that payments resume after the move to avoid an accidental delinquency.

The TSP checks payment records at the beginning of each month. If you’ve missed two or more payments, or your payments have been less than the required amount, you’ll receive a notification with a deadline to submit the missing amount. Fail to bring the loan current by that deadline and the TSP declares the entire unpaid balance a taxable loan.²

If You Leave Federal Service With a Balance

This is where most people get into trouble. When you separate from federal employment with an outstanding TSP loan, payroll deductions stop. You then have three options:⁵

Keep the loan active by making monthly payments through direct debit, check, or money order. The payment schedule switches to monthly, but the original maximum repayment term still applies.
Pay it off with a lump-sum payment covering the remaining balance and accrued interest before the deadline.
Do nothing, in which case the TSP forecloses the loan and the outstanding balance and accrued interest become taxable income.

Option three is the default if you don’t act. Once a separated participant’s loan has been foreclosed, it cannot be repaid. The taxable event is final.⁵

Tax Consequences If the Loan Is Declared Taxable

When a TSP loan is foreclosed or declared a taxable distribution, the IRS treats the outstanding balance and accrued interest as though you took a withdrawal. You owe federal income tax on the full taxable amount, and it’s reported on Form 1099-R.⁸

If you’re under age 59½ when the loan is declared taxable, you’ll typically owe an additional 10% early withdrawal penalty on top of the income tax. An exception: if you separated from service during or after the calendar year you turned 55, the 10% penalty doesn’t apply, though the income tax still does.⁸

There is a safety valve. A loan foreclosed after you separate from service qualifies as a Qualified Plan Loan Offset, which gives you until your federal tax filing deadline, including extensions, to roll the taxable amount into an IRA or another eligible employer plan using personal funds. Complete the rollover and you owe zero tax and zero penalty on that amount.⁸ Miss the deadline and the tax bill sticks.

If You Enter Active Duty

Civilian employees who enter active duty military service get special treatment. An outstanding TSP loan from your civilian account is suspended and won’t be declared in default while you’re serving. Interest continues to accrue, and the maximum repayment term is extended by the length of your military service.⁹

When you return to civilian pay status, your agency resumes payroll deductions and the TSP reamortizes the loan to account for the accrued interest. You’ll need to submit documentation of the start and end dates of your military service. Without it, the loan may be foreclosed, though foreclosures caused by military service can be reversed within 90 days of returning to civilian service or pay status.⁹ A separate protection applies to the interest rate itself: if you took the loan before entering active duty, you can request that the rate be capped at 6% annually for the duration of your service.⁴

1
eCFR. 5 CFR 1655.2 – Eligibility for Loans
2
The Thrift Savings Plan (TSP). Primary Residence General Purpose and Loans
3
Internal Revenue Service. Issue Snapshot – Borrowing Limits for Participants With Multiple Plan Loans
4
eCFR. 5 CFR Part 1655 – Loan Program
5
The Thrift Savings Plan (TSP). TSP Loans
6
The Thrift Savings Plan (TSP). Buying a House
7
eCFR. 5 CFR 1655.18 – Spousal Rights
8
TSP.gov. Changes to Tax Rules About TSP Payments
9
eCFR. Suspending TSP Loans, Restoring Post-Employment Distributions, and Reversing Loan Foreclosures