Can you borrow money from your 401(k)?

The IRS allows 401(k) plan participants who are actively employed to borrow up to 50% of their account value or $50,000, whichever is less. However, it's up to each 401(k) plan to decide if it wants to allow 401(k) loans, and not all plans do.

Is it worth taking a loan from a 401(k)?

A 401(k) loan can be a smart way to borrow money in some cases, as it has easier qualifications and lower costs than most other types of borrowing. However, there are some drawbacks, such as potentially forgoing investment returns from your retirement savings.

How long do you have to pay back a 401(k) loan?

In most cases, a 401(k) loan must be repaid within five years. The exception is if you use the loan towards a purchase of a primary residence, in which case longer terms (usually 10 or 15 years) are allowed.

Do you have to pay back a 401(k) loan if you get fired?

Yes, under the current rules, if you no longer work for the employer that sponsors the 401(k) plan, the loan must be repaid. You'll have until your tax return deadline to repay the loan, or it will be considered an early withdrawal of 401(k) funds, and may result in an IRS penalty.

7 Need-to-Know Things About 401(k) Loans

Don't take a 401(k) loan without reading this.

By Matthew Frankel, CFP – Updated Feb 6, 2026 at 12:14 PM EST | Fact-checked by Parker Hicks

Key Points

401(k) loan limits are the lesser of $50,000 or 50% of your vested balance.
Loan repayment is typically within five years, longer if used for a primary residence.
Defaulting leads to a 10% penalty and potential loss of future investment gains.

Loading paragraph...

Hand placing a coin into a glass jar labeled "retirement" with stacked coins and an alarm clock next to it. — Image source: Getty Images.

Loading image...

Loading paragraph...

401(k) loan FAQs

Loading faq...

About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

The Motley Fool has a disclosure policy.