A 401(k) loan allows you to borrow against your vested 401(k) balance and pay back the amount plus interest to your account over a specified period.
While we understand you may find yourself in a situation where you need to take money out of your 401(k), we encourage you to investigate other alternatives to avoid cutting into your retirement savings.
You can find the full loan Terms & Conditions here.
What should I consider before I take out a 401(k) loan?
Before taking a loan from your retirement savings, there are several risks you should understand:
If you don’t repay the loan, including interest, any unpaid pre-tax amounts become a taxable distribution (and may be subject to a 10% early distribution penalty).
If you leave your current job, you will be required to repay any outstanding loan balance in full within 90 days, or your loan will become a taxable distribution (and may be subject to a 10% early distribution penalty).
You might lose out on compounding market returns to grow your retirement savings.
Am I eligible to take a loan from my 401(k) plan?
You are generally eligible to take a loan from a standard 401(k) plan as long as you are an active employee of the company sponsoring the plan, have no outstanding loans from the plan (including an non-repaid deemed distributed loan), and have a vested account balance of at least $2,000.
If you are a participant in a Starter 401(k) plan with Guideline, you are not eligible to take a loan.
Can I take more than one loan?
No, Guideline plans limit participants to one outstanding loan at a time. This includes any deemed distributed loans that have not been repaid.
How much can I borrow from my 401(k)?
The minimum loan amount is $1,000.
The maximum loan amount is going to depend on your account balance and whether you repaid another loan in the past 12 months.
The formula for determining the maximum loan you can take is the lesser of:
50% of your vested account balance
$50,000 minus the highest outstanding balance in the past 12 months
Learn how to calculate your maximum allowable loan and view examples here.
Will I have to pay interest on my plan loan?
Yes, interest will be included in the payment schedule (amortization schedule) generated when you take a loan. This interest will be put back into your plan account along with the loan repayments. The interest rate changed will be the prime rate plus 1.
How long can I take to repay my loan?
In general, plan loans must be paid back within 5 years, although you can choose a shorter length of time.
If you are taking the loan to purchase a primary residence, your loan term can be up to 10 years. You will need to provide the following documentations to request the primary residence loan terms:
A copy of your home purchase agreement signed by you and the seller. The agreement must include the closing date and balance of the purchase price, or
A mortgage contract signed by you and the seller.
What are the repayment requirements?
You must repay the loan by the end of your repayment term. The total amount due must be repaid in equal payments that consist of both principal and interest. The payments must be made according to your payroll schedule (but at least quarterly).
Can I make additional payments or pay off my loan early?
Yes, you can make additional payments and/or fully pay off your loan ahead of the payment schedule within the Loans page of your participant dashboard. Learn more about how to make payments of pay off a current 401(k) loan here.
Can I suspend or pause my loan repayments?
You can pause repayments in 2 specific circumstances: when you are out on a bona fide leave of absence or qualified military service leave. You can find more information about loan suspensions here.
Can I change my repayment schedule or re-amortize my loan?
No. While you can make additional payments through your dashboard, you cannot change your repayment schedule or re-amortize your loan repayments.
What happens if I miss loan payments?
If you miss a loan payment, you will have a certain amount of time to make up the missed payment(s). This period of time, known as the “cure period,” is 90 days from the date of the missed payments for Guideline loans.
Any new payments received after a missed payment will be applied to the oldest outstanding payment. If you have a missed payment that is not made up by the end of the cure period, the entire remaining unpaid loan balance will be deemed distributed. Find more information about deemed distributions and offsets here.
What happens if I leave employment or my employer terminates the plan before I finish repaying my loan?
If you leave your employer for any reason or your employer terminates their 401(k) plan, you will need to pay off your remaining loan balance or it will be treated as a taxable distribution.
Please note that you will not have the option to roll over your loan to another employer plan, regardless of whether that plan would accept it. You can find more information about how leaving your employer can affect your loan here.
What happens if my employer switches 401(k) providers?
If your company is moving to or from Guideline, your existing loan will transfer with the rest of your plan assets. We recommend monitoring your account and payroll to ensure your loan payments continue to be made. If any payments are missed during the transition, you’ll work with your employer to correct the payments. You can find more information about how a change in your 401(k) service provider can affect your loan here.
Can I rollover the loan I have in another plan into my plan at Guideline?
No. Guideline 401(k) plans do not allow you to rollover a loan into the plan. This applies even if Guideline is the record keeper for both unrelated plans. If you have a current, outstanding loan balance with your prior retirement provider and you are looking to rollover funds into your Guideline 401(k), you will need to discuss your options with your prior retirement provider before you request a rollover to Guideline.
How do I request a loan?
If you decide to move forward with a loan, you can apply directly within your Guideline dashboard. To start the process, click on the Transfers option in the main menu, then access Loans in the dropdown menu. Please note, the Loans page will only be accessible if you are within a standard 401(k) plan, do not have a current outstanding loan, and are still employed with the company sponsoring your plan.
If your loan is approved, you will receive a notification when your promissory note and amortization schedule become available and when your check is on its way.
Within the Loans page, you’ll also be able to also review the status of your loan request and review the promissory note when it’s available to sign.
How long does it take to receive the funds from a loan?
The loan application process can take around one month from when you apply to when you receive your funds. We encourage you to submit your application in advance of when funds are needed to allow enough time for processing and delivery. Find out more about the 401(k) loan processing timeline here.