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TSP Loans Explained: Rules, Limits & Risks

Updated June 2026 · ~7 min read

A Thrift Savings Plan loan lets you borrow from your own TSP balance and pay yourself back, with interest, through payroll deductions. It can be a cheaper option than a credit card or personal loan, but it also has real downsides. Here's how TSP loans work and what to weigh before you take one.

The two types of TSP loan

Type	Use	Repayment term
General purpose	Any reason; no documentation required	1 to 5 years
Residential	Buying or building your primary home; documentation required	Up to 15 years

You can have one general purpose and one residential loan outstanding at the same time, per account (civilian and uniformed-services accounts are separate).

How much you can borrow

Minimum: $1,000.
Maximum: generally the smallest of (a) your own contributions and their earnings, (b) 50% of your vested balance or $10,000 (whichever is greater), or (c) $50,000 minus your highest outstanding loan balance in the past 12 months.

Only the money you contributed (and its earnings) is available to borrow — not the agency/matching portion.

The interest goes back to you

The interest rate on a TSP loan is the G Fund rate at the time your application is processed, and it's fixed for the life of the loan. The key difference from a bank loan: the interest you pay goes back into your own TSP account, not to a lender. There is also a small one-time processing fee.

The real cost: opportunity cost

While your money is out on loan, it is not invested in the markets. If the C, S, or I funds rise during that time, you miss those gains — and you're effectively earning only the G Fund rate on the borrowed amount. Over a multi-year loan, that lost growth can dwarf the interest you "save" versus another lender.

The biggest risk: if you separate from service with an outstanding loan and don't repay it, the unpaid balance is treated as a taxable distribution — and if you're under 59½, it may also trigger a 10% early-withdrawal penalty. Borrow only what you're confident you can repay while you're still in service.

When a TSP loan can make sense

You face a genuine, short-term need and the alternative is high-interest debt.
You're confident you'll stay in service long enough to repay through payroll.
You keep contributing at least 5% while repaying, so you don't lose the government match.

Before borrowing, it's worth seeing what that money could become if you left it invested. Try different scenarios in the TSP calculator.

Open the TSP calculator →

Educational only — not financial advice. TSP loan rules can change; confirm current terms and request a loan at tsp.gov. CalculateTSP is independent and not affiliated with the U.S. Department of Defense, DFAS, OPM, or the FRTIB.