A TSP loan lets you borrow against your own TSP retirement account — no bank, no credit check, no effect on your credit score. You pay yourself back, with interest, through automatic paycheck deductions. It’s a strange kind of debt: money you already own, lent to yourself, at a price.
It’s also common: FERS loan usage has increased every year since 2022, reaching 9.5% in 2025 — the highest share of FERS participants on record. Financial hardship withdrawals climbed the same way, to a record 4.9% of FERS participants in 2025.
This page covers how TSP loans actually work: the two loan types, who qualifies, how much you can borrow, where the interest rate comes from, and the rule that catches people off guard most often: what happens to the loan balance if you leave federal service before it’s repaid.
The TSP offers two kinds of loans, and the difference comes down to what you’re borrowing for:
Both loan types carry the same interest rate. Only the fee, the term, and the paperwork differ.
You can take a TSP loan if all of the following are true:
Separated and retired participants can’t take a new loan at all. Two loans can be outstanding on each TSP account, and only one of them can be a primary residence loan. With both a civilian and a uniformed-services account, that ceiling doubles to four. A court order against your account, for something like child support, alimony, or a former spouse’s share, blocks a new loan until it’s satisfied.
The minimum TSP loan amount is $1,000. The ceiling is the smallest of three tests, and the TSP runs all three every time you apply:
This is a per-person limit, not a per-loan or per-account one: if you have both a civilian and a uniformed-services account, the combined balances count toward the second and third tests. Your account is revalued at the end of every business day, so the maximum can shift daily. For the number that actually applies to you, plug your balance into the calculator.
Your TSP loan rate is the G Fund’s interest rate for the month before you request the loan, and it’s fixed for the entire life of the loan: it won’t move again, whatever the G Fund does afterward. The G Fund is the TSP’s government-securities fund; its rate is a Treasury-set yield on short-term government debt, not a market rate priced for your creditworthiness, which is why it tends to run well below what a bank charges for a personal loan or a credit card. Every payment you make, principal and interest, goes back into your own account, and there’s no bank collecting a spread. For the actual number, see today’s rate, its full history, and how it compares to consumer borrowing rates.
A TSP loan isn’t new money. It’s disbursed proportionally out of your existing balance, traditional and Roth, across whatever mix of funds you’re invested in, and repaid back into that same mix. While it’s out, that portion of your account isn’t invested in the market anymore; it’s just a receivable you’re paying interest on. If your funds would have returned more than your loan rate over those years, you come out behind for having borrowed; if they’d have returned less, you come out ahead. Nobody knows which in advance. That trade-off, not the interest rate on the loan agreement, is the real cost of a TSP loan. See the calculator’s true-cost comparison for what it can add up to under different assumptions.
You apply by logging in to My Account on tsp.gov, or by calling the ThriftLine. A general purpose loan needs no paperwork; a primary residence loan requires documentation within 30 days of the request. If you’re married, your spouse has a say: FERS participants and uniformed-services members need spousal consent before the loan can be processed, while CSRS participants just need to notify their spouse, who’s informed once the loan goes through. The TSP can approve exceptions in limited circumstances.
Once your loan is processed, it’s typically disbursed within three business days, by direct deposit or check. Make sure your mailing address or bank information has been on file for at least seven days before you apply. The TSP won’t send funds to a destination that was just added, and a lost or misdirected check can take six weeks or longer to replace.
Repayment happens automatically through payroll deduction, starting within 60 days of disbursement and continuing every pay period no matter what pay cycle you’re on. Check your leave and earnings statement to confirm the deduction started and is the right amount — you’re responsible for correct repayment even when your payroll office drops the ball.
Your payment amount is fixed for the life of the loan, with two exceptions the TSP handles for you. If you switch agencies or pay cycles, your payment gets reamortized to match the new schedule. If you go into approved nonpay status, such as furlough or leave without pay, your payments are suspended for up to a year (indefinitely if the nonpay status is for military service), though interest keeps accruing the whole time. When payments resume, the loan is reamortized again, and because the payoff deadline hasn’t moved, the new payment can be higher than what you were paying before.
Outside those two situations, you can pay extra at any time by check, money order, or a one-time direct debit (debit payments post only twice a month), and you can pay off the full balance early with no penalty. Log in to My Account for your exact payoff amount and the date it’s good through.
Unlike some 401(k) plans, taking a TSP loan doesn’t pause your contributions or your agency match. Both keep running as before. The loan reduces your invested balance, not your ongoing savings rate.
This is the rule most likely to catch someone off guard. If you separate with a loan outstanding, you have three options: keep paying by check, money order, or direct debit (your schedule switches to monthly, though the original maximum term still applies); pay off the balance by the deadline you’re given; or let it go to foreclosure. A foreclosed balance is treated as a taxable distribution — ordinary income tax on the taxable portion, plus a 10% early-withdrawal penalty if you’re under 59½. You can avoid that hit by rolling an equivalent amount of your own money into an IRA, the TSP, or another eligible employer plan by your tax filing deadline, extensions included. You cannot take a new TSP loan once you’ve separated.
The consequences of a missed TSP loan payment depend on whether you’re still working or not. If you’re an active federal employee or service member and you fall behind, the TSP flags it at the start of each month and sends a notice after you’ve missed two or more payments. If you miss the deadline in that notice, the loan becomes a “taxed loan” — the outstanding balance and accrued interest become taxable income, and you owe a 10% early-withdrawal penalty if you’re under 59½. A taxed loan still counts as one of your two allowed loans and still reduces what you can borrow next, but you can repay it any time before you separate from service. If you’re already separated when the loan goes delinquent, it’s foreclosed instead, taxed the same way, and can’t be repaid.
You’ll see this objection everywhere: you repay a TSP loan out of your paycheck, which is already-taxed money, and if that money lands back in your traditional TSP account balance, it gets taxed again when you withdraw it in retirement. That’s true, but it’s also smaller than it sounds, because the double taxation only applies to the loan interest payments.
The principal you borrowed was already sitting in a tax-deferred account; you took it out and put the same amount back, so nothing new gets double-taxed there. Every dollar withdrawn from a traditional TSP account balance gets taxed the same way, loan or no loan. Only the interest is paid with after-tax dollars, and then taxed again on withdrawal (TSP loan interest isn’t tax-deductible). On a typical TSP loan, the interest is only a small fraction of what you borrowed — see example below. And repayments that land in your Roth balance bypass the problem: Roth money is already after-tax, and qualified earnings come out tax-free, so there’s no second tax event on either side.
As an example, as of July 2026 if you take out a $20,000 TSP loan with a 60-month term, at the current interest rate of 4.50%, the total interest you would pay is $2,371.60 → the interest only represents a small fraction (11.9%) of the total loan amount.
The decision to borrow is usually made before the decision of where to borrow from — for many, a job loss, a failing roof, a medical bill don’t leave much room to debate whether debt is a good idea. What’s worth comparing is the cost once that decision is already made.
Here’s what a $20,000 loan actually costs over 60 months, compared to a car loan and a credit card at consumer rates as of July 2026:
| Borrowed From | Rate | Per Month | Total Interest |
|---|---|---|---|
| TSP loan | 4.50% | $372.86 | $2,371.60 |
| 60-month car loan | 7.14% | $397.35 | $3,841.00 |
| Credit card | 20.94% | $540.39 | $12,423.40 |
Compared to ordinary consumer debt — a credit card, a personal loan, a car loan — a TSP loan usually wins on price and on paperwork: no credit check, no rate tied to your credit score, and none of the closing costs a HELOC often carries. Against a hardship withdrawal, it wins almost every time you qualify for both: a TSP withdrawal is gone for good, taxed, and possibly penalized, while a loan puts the money back in your TSP account where it started.
Where it gets riskier: if a job change or separation is likely before you’d finish repaying. The terms themselves don’t change — same rate, same payoff date — but the payroll deduction stops, and it becomes your job to send regular payments, by check, money order, or direct debit, with no payroll office to catch a slip. If you miss the deadline the TSP gives you for making that switch, or fall behind afterward, the unpaid balance is foreclosed and taxed as a distribution. And the cost that doesn’t show up on the loan paperwork is the market return you potentially give up while the money’s out of your account — worse if you happen to borrow right before a strong stretch for stocks, better if you don’t, and unknowable in advance either way.
How long does a TSP loan take to process?
Once your loan is processed, it’s typically disbursed within three business days, by direct deposit or check.
Can I have 2 TSP loans at the same time?
Yes, one loan of each type per TSP account — You can have up to two TSP loans at one time per account, and up to four if you have both a civilian and a uniformed-services account. Only one of the two can be a primary residence loan.
Does a TSP loan affect your credit?
No. Taking a TSP loan involves no credit check, and neither the loan nor your repayment history is reported to the credit bureaus — it won’t show up on your credit report, and it won’t move your credit score in either direction.
Can I pay off my TSP loan early?
Yes, at any time, with no prepayment penalty. Log in to My Account to get your exact payoff amount and the date it’s good through.
Can I take a TSP loan after retirement?
No. Once you’ve separated from federal service, you’re not eligible for a new loan — only for the repayment options above on any loan you already have outstanding.
TSP hardship withdrawals have risen even faster than TSP loans — during the 2025 government shutdown, hardship withdrawal initiations rose 77.5% year-over-year, versus ~ 50% for loans.
For anyone who qualifies for both and can borrow enough to cover the need, a TSP loan almost always costs less than a hardship withdrawal for the same cash. A hardship withdrawal is gone for good, taxed as ordinary income the year you take it, and possibly hit with a 10% penalty if you’re under 59½. A loan puts the same money back where it started, with interest that lands in your own account instead of the IRS’s.
None of this replaces your own numbers. The TSP loan calculator will tell you which option actually costs less in your situation.