What is a TSP loan?

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A Thrift Savings Plan (TSP) can be a valuable retirement savings tool, but it can also be a source of funds if you find yourself in need of a loan.
Essentially, with this type of loan, you can borrow against your savings and repay yourself with interest. However, certain requirements and restrictions apply, limiting how and why you receive the loan. To help you decide whether this type of loan is right for you, we’ve laid out how TSP loans work and what to consider before getting one.
A Thrift Savings Plan loan allows uniformed service members and federal workers to borrow funds from their TSP accounts. The loans have fixed terms and fixed interest rates.
Jump to insightThere are two types of TSP loans: primary residence loans, which can be used for the construction or purchase of a new home, and general purpose loans, which can be used for most other purposes.
Jump to insightLoans begin at $1,000 and can go up to $50,000, depending on your account.
Jump to insightYou can apply for a TSP loan online via My Account. You can also contact ThriftLine directly to apply over the phone.
Jump to insightHow does a TSP loan work?
Thrift Savings Plan loans offer a way for uniformed service members and current federal civilian workers to borrow from the funds they already have in their TSP accounts. These secured loans use your savings as collateral for the personal loan, so they’re typically easier to qualify for.
Current TSP loan interest rate
4.250%*
*As of June 2025
TSP loans also offer a stable interest rate that matches the interest rate of the Government Securities Investment Fund, or G Fund. It remains the same throughout the entire life of the loan. Your repayment terms depend on what the loan is used for, however.
After you take out the loan, you can repay using automatic federal payroll deductions or via debit, check or money order if you have already left the service.
TSP loan types
There are two types of TSP loans: general purpose loans and primary residence loans.
General purpose loans can be used for any purpose. No documentation is needed, and terms last from 12 to 60 months.
Primary residence loans are specifically designed for purchasing or building a primary residence. You must submit documentation to qualify, and the term lasts 61 to 180 months.
General purpose vs. primary residence TSP loans
General purpose TSP loan | Primary residence TSP loan | |
---|---|---|
Purpose | Any | Purchase or construction of a new home |
Loan term | 12-60 months | 61-180 months |
Documentation | Not required | Required |
Processing fee | $50 | $100 |
TSP loan limits
There are limits on how much you can borrow with a TSP loan. The minimum is $1,000.
The maximum TSP loan amount is the lesser of:
- Your TSP balance minus outstanding loans
- 50% of your vested account balance or $10,000, whichever is greater, minus any outstanding loans
- $50,000, minus any outstanding loan balances from the last 12 months
For those with both civilian and uniformed services accounts, calculations will be based on your combined account balances and loan amounts.
For your convenience, you can log in to TSP.gov’s My Account and view the maximum loan amounts already calculated in the “Loans” section. However, keep in mind that TSP account balances are recalculated daily, so your TSP loan maximum could change from day to day.
TSP loan eligibility
There are specific eligibility requirements you must meet in order to borrow from your TSP account.
You must have current employment as a federal civilian employee or uniformed services member under pay status. Your TSP account must have a minimum $1,000 balance from contributions and associated earnings; mutual fund investments do not count.
These additional requirements apply for approval:
- No TSP loans may have been repaid in full within the last 30 business days.
- There have been no taxable distributions on a loan within the past 12 months, unless related to separation from federal service.
- There are no court orders against your TSP account.
You may only have a single general purpose TSP loan and a residential TSP loan at any time for your TSP account.
If you’re using a primary residence loan, there are additional requirements. It can only be used toward the purchase or construction of one of the following property types:
- House
- Townhouse
- Condominium
- Mobile home
- Shares in a cooperative housing corporation
Other purchases (e.g., land) do not apply.
There are also requirements regarding the use of primary residence loans. They can’t be used for the following:
- The purchase of a home you’ve already closed on
- The refinancing or prepayment of an existing mortgage
- Additions or renovations to existing residences
- Personal reimbursement for earnest money or down payments
- Buyout of another person’s share in your home
- Any homes not purchased in whole or in part by you or your spouse
Before applying for a TSP loan, carefully review these requirements to ensure you are eligible.
How to apply for a TSP loan
Applying for a TSP loan is a straightforward process. You may be able to complete the entire application process online by logging in to My Account. You can also contact ThriftLine directly to apply over the phone.
Be prepared to submit documentation supporting your loan request. This can be done via phone, fax or mail. If you’re married, your spouse will need to sign for their consent.
Take the time to review your application to avoid any slowdowns due to errors or typos. Once your application is approved, you generally receive funds within three business days, although mailed paper applications could take weeks to process.
Pros and cons of TSP loans
There are benefits and drawbacks to TSP loans. Think about the following before you take out this type of loan.
Pros
- Low interest rates
- Easy to qualify
- Interest is paid back to you
- Speedy funding
- No credit check
Cons
- Fees
- Not great for credit-building
- Fewer opportunities for financial gains
- Can tether you to your job
Pros of TSP loans
One of the biggest perks of a TSP loan is a low interest rate. These loans have an interest rate of 4.250% as of publishing, which is significantly lower than the average personal loan interest rate of 11.66% as of February 2025. Also, because your TSP funds serve as collateral for the loan, it’s typically easier to qualify for than a personal loan. And, ultimately, you receive back the interest you pay with your loan payments.
It’s typical to look into TSP loans when you’re buying a house, in a short-term emergency or trying to avoid high-interest debt — it doesn’t show up on your credit report (it doesn’t require a credit check), and funding is typically pretty fast.
Cons of TSP loans
One minor downside is that you will have to pay a fee for your TSP loan ($50 for a general purpose loan and $100 for a primary residence loan). Another thing to consider is that TSP loans are not reported to credit bureaus, so they will not help improve your credit score.
While you receive interest if you meet your payment obligations in full, if you fail to repay, you’ll lose your funds. Removing funds from your account could also complicate your retirement strategy.
When you take a loan from your TSP account, you also lose out on any compound interest your account could have generated on those funds.
Before taking out a TSP loan, also consider your feelings about your job — and your job security. “If you decide to quit your job or get laid off as part of federal budget cuts, you have only 90 days to pay back the loan or it becomes a taxable distribution,” Corey Noyes, the founder of Balanced Capital, a financial planning company, warned.
“That means that if you can't pay back the lump sum all at once, what was once essentially an interest-free loan is now going to cost you your income tax rate — and a 10% penalty if you are under 59 ½. That could be a charge of anywhere from 12% to 45%. All of a sudden, the rate on the loan from the bank might look more appealing,” Noyes explained.
Repaying your TSP loan
Once you receive your funds, it’s time to begin repayment.
Because you have a fixed interest rate on your TSP loan, your loan amount remains the same throughout the life of the loan. However, your loan amount could change if you switch jobs to another agency and experience a payroll change. It could also change if you enter a period of nonpayment, during which your loan payments will be suspended.
Repayment must begin within 60 days of the disbursement of funds. Your employer will be automatically notified of payroll deductions, which are taken automatically from your paycheck each pay period. Each payment is then credited back to your TSP account.
Be careful to ensure that deductions are being taken on time and in full; even if a payroll deduction is missed or incorrect, it’s still your responsibility to make payments.
If you decide to make additional payments on your loan, you can do so using a personal check, cashier’s check or money order. There is also the option for a one-time debit.
Separation of service
If you separate from service prior to the end of your loan term, you have options:
- Keep the loan active: You can set up monthly payments by check, debit or money order so the loan remains active. You may revert to a monthly schedule, but your loan term will remain the same.
- Pay in full: You can pay off your loan in full by the deadline.
- Loan foreclosure: You can allow the loan to go through foreclosure. You will then receive taxable income from any taxable parts of your outstanding balance and accrued interest.
Loan delinquency
If you miss payments or otherwise fail to honor the terms of your loan, you could face serious consequences.
When the loan is delinquent, the IRS will consider any taxable portion of your balance and accrued interest as taxable income. You may also be subject to an early withdrawal penalty if you are under the age of 59 ½.
If you have gone into approved nonpay status, your payments will be paused for either the length of your nonpay status or one year. There is no limit for those who leave their civilian jobs for military service.
During the loan suspension, interest will still accrue, and you have the option to make your own payments during this time to pay down the loan.
Alternatives to a TSP loan
A TSP loan isn’t your only option if you need funds quickly. Consider the following:
- Personal loan: A personal loan does not have the same requirements as a TSP loan. Be sure to compare lenders and interest rates to find the best personal loan for your needs.
- Home equity loan: If you need a loan for home renovations, consider a home equity loan, which borrows against the equity you have already built up in your home.
- Credit card: If you need a smaller amount, consider a credit card with a 0% APR that can help you finance your needs immediately.
- Personal funds: Whether it’s your personal savings or a loan from a trusted family member or friend, you could forego the loan altogether and use cash instead.
An experienced financial advisor can help you determine whether a TSP loan is right for you.
FAQ
Does a TSP loan affect your credit?
No, a TSP loan does not affect your credit because it is not reported to Equifax, Experian or TransUnion.
What are the repayment terms for a TSP loan?
Repayment terms for a TSP loan are 12 to 60 months for general purpose TSP loans and 61 to 180 months for primary residence loans.
Can I take multiple TSP loans at once?
Yes, you may have up to two TSP loans at one time, but only one can be a primary residence loan.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Thrift Savings Plan, “TSP Loans.” Accessed June 4, 2025.
- SoFi, “How Does a Thrift Savings Plan (TSP) Loan Work.” Accessed June 4, 2025.
- Fidelity, “CNBC Halftime Report Final Trades.” Accessed June 4, 2025.
- Federal Reserve, “Federal Reserve Board - Consumer Credit - G.19.” Accessed June 4, 2025.
- Serving Those Who Serve, “Explaining TSP Loan Options: When, Why, and How to Use Them Wisely.” Accessed June 4, 2025.