The Thrift Savings Plan (TSP) is a retirement savings and investment plan for current federal civilian workers and members of the uniformed services. It’s very similar to 401(k) plans provided to employees of private corporations and offers the same type of savings and tax benefits.
TSP loans allow you to borrow against those funds at better rates than other types of personal loans. But, there are loan rules and costs to be aware of, and it can slow the growth of your retirement savings.
What are TSP loans?
TSP loans allow TSP participants — uniformed service members and current federal employees — to borrow money from their TSP account. There are two types of TSP loans: general purpose loans and primary residence loans.
General purpose loans
- Can be used for anything
- Requires no documentation
- Loan terms range from 12–60 months
- Mandatory $50 processing fee
Primary residence loans
- Can only be used for the future purchase or construction of a principal residence
- Requires some documentation
- Loan terms range from 61–180 months
- Mandatory $100 processing fee
And, you can only use a primary residence loan for costs still needed to close. This means you can’t use it to reimburse yourself for money already spent, plus other restrictions apply.
How do TSP loans work
When you take out a TSP loan, you’re borrowing from money you already have in your retirement account. And you’ll repay the loan plus interest through automatic payroll deductions if you’re currently employed. If you leave federal service with an existing loan, you can pay by check, money order or direct debit.
The interest rate is fixed throughout the life of the loan and is equal to the G Fund rate — the Government Securities Investment Fund — for the month before you apply for the loan. The G Fund rate is 4.25% as of March 2025. This rate is much lower than personal loans, which typically range from 5.99% to 35.99%.
TSP loans don’t require a credit check, which is another departure from personal loans, so even borrowers with bad credit can qualify for loans up to $50,000. These loans are also not reported to credit bureaus, so there’s no impact to your credit even if you can’t pay it back. On the other hand, TSP loans won’t help you to build credit or raise your score, both of which help to improve your chances of qualifying for credit in the future.
You can choose to have your loan proceeds deposited directly into your bank account (recommended) or get a check by mail. Your address or account details need to be on file for at least seven days before the loan funds can be disbursed, so be sure to enter this information before starting your request to speed up the process.
What are the eligibility requirements for TSP loans?
You need to meet all of the following criteria to qualify for a TSP loan:
- You’re currently employed as a federal civilian employee or are a uniformed service member.
- You have at least $1,000 in your account, including your contributions plus earnings. (Note: This doesn’t include money you have invested in the TSP mutual fund window, which can’t be borrowed.)
- You are in “pay status” — because your loan payments are deducted from your paycheck.
- You haven’t repaid a TSP loan in full within the last 30 days.
- You can’t have a court order against your account.
- If you’re married, your spouse must consent to the loan or at least be notified, depending on your TSP participant status — although some limited exceptions may apply.
Keep in mind that you can have two TSP accounts — both a civilian and a uniformed service member account — and the above eligibility requirements apply to whichever account you plan to borrow from.
TSP loan application process
If you’re applying for a general purpose loan:
- Log in to your TSP account at TSP.gov or by contacting the ThriftLine service center at 877-968-3778.
- You don’t have to fill out a paper application, and general purpose loans don’t require any documentation from you.
If you’re applying for a primary residence loan:
- Log in to your TSP account at TSP.gov or by contacting the ThriftLine service center at 877-968-3778.
- Submit documentation such as a signed sales agreement or purchase contract when you’re buying a house. The documentation needs to include how much money is still needed to close.
- If you’re building a new home, submit a builder’s contract or building and utility permits. Other documentation to justify the loan amount may also be required, depending on your situation.
How long does it take to get a TSP loan?
If you apply online, you should get your loan proceeds deposited into your account within three business days. If you don’t request direct deposit or your account is incomplete or not valid, you’re mailed a paper check, which might take a week or two. If you opt for a check and it’s lost, damaged or stolen, it could take up to six weeks to be replaced.
How much can I borrow?
The minimum amount you can borrow is $1,000. The maximum amount is the smallest of the following:
- Your own contributions and earnings in your TSP account, not including any outstanding loan balance, if any.
- Half of your contributions and earnings or $10,000, whichever is more.
- $50,000, less your outstanding loan balance, if any, from the last 12 months.
If you’re not sure how to calculate your potential loan amount, you can log in to your TSP account to see exactly how much you’re eligible to borrow.
It’s important to note that whatever your maximum borrowing limit is, that is per person not per loan. For instance, if you’re eligible to borrow $20,000 and you take out a $5,000 general purpose loan but then you also want to get a primary residence loan, your maximum loan amount would be $15,000.
How many TSP loans can you have?
You’re allowed to have two TSP loans per account, but only one can be a primary residence loan. So you can have either two general purpose loans or one general purpose and one primary residence loan.
If you have two TSP accounts — one for federal civilian employees and one for uniformed service members — you can have two loans on each account, for a total of four. In that case, you could have two primary residence loans and two general purpose loans or four general purpose loans.
How much a TSP loan costs
TSP loans charge a fixed interest rate equal to the G Fund rate, which is 4.25% as of March 2025. You’ll also have to pay a processing fee of $50 or $100, depending on the loan type. Technically, since you’ll be paying the loan back to yourself with interest, the only final cost of the loan is the processing fee. But you need to have the payments deducted from each paycheck, which can strain your monthly budget.
In addition, there are some less direct costs that you should consider before getting a TSP loan. For example, by borrowing money from your retirement account, you’ll be depriving yourself of the money those funds could have earned if you left them in your plan. Plus, if the investments in your retirement fund are earning a higher rate of return than you’re paying yourself for the loan, you lose out on that money as well.
What happens if I don’t pay back my TSP loan?
Your TSP loan will become a “taxed loan,” meaning your outstanding loan balance plus accrued interest will be considered taxable income by the IRS in either of the following situations:
- You miss two or more payments, or your payments are for less than the required amount and you don’t make up for the shortfall within the specified period stated in your loan agreement.
- You fail to repay your loan in full by the maximum loan term, which is 60 months for a general purpose loan and 180 months for a primary residence loan.
Keep in mind that a taxed loan permanently lowers the funds in your TSP account unless you repay it. Plus, if you don’t pay it back it counts against your eligibility for another TSP because it counts as one of the two loans you’re allowed to take out. For example, if the total amount you were allowed to borrow was $10,000, but you have a taxed loan of $5,000, you’d now only be able to borrow $5,000.
Pros and cons of TSP loans
While there are good reasons to get a TSP loan, be sure to consider the drawbacks as well.
Pros
- Low rates. Historically, interest rates for TSP loans are lower than you can get with almost any consumer loan, such as personal loans or home equity financing.
- No credit check. Anyone can get a TSP loan — provided you meet the eligibility requirements — regardless of your credit score.
- Low risk. Compared to most loans, TSP loans are fairly low risk because you’re borrowing from yourself instead of a lender, meaning your credit score won’t suffer and you can’t be sued.
- No prepayment penalties. You can pay off a TSP loan at any time without getting charged an early repayment penalty.
- Loan flexibility. While primary residence loans are restricted to new home purchases, general purpose loans can be used for anything you want
Cons
- Less money invested. Once you take out a TSP loan, that money is no longer invested and benefiting from compound interest.
- Potentially reduced contributions. The burden of making loan repayments could cause you to pause or lower your contributions to your TSP account, slowing down the growth of your retirement savings.
- Risk of default. If you’re delinquent on your payments or don’t pay the loan in full by its due date, the unpaid balance becomes a taxed loan, meaning those funds are now considered taxable income. You may also be assessed a 10% early withdrawal penalty if you’re younger than 59.5.
- Processing fee. The fee you pay to process your loan — either $50 or $100 — is nonrefundable and automatically deducted from the loan amount before the loan proceeds are disbursed.
- Doesn’t build credit. Because TSP loans aren’t reported to credit bureaus, they won’t help you build credit or improve your score, so the loan won’t help you when applying for new credit down the road.
Alternatives to TSP loans
If you think a TSP loan isn’t the best move for you or just want to explore all your options, consider these alternatives.
- Personal loans. A personal loan could be a good option to pay for large expenses, but you’ll typically need a good credit score to get the most competitive rates.
- Cash advance apps. If you only need a small, quick loan between paychecks, you may want to consider a cash advance app. You can look for ones with minimal fees to save money.
- Home equity financing. Homeowners may want to consider a home equity loan or home equity line of credit (HELOC) instead of borrowing from retirement funds.
- Introductory rate credit cards. Consider a credit card with a 0% introductory rate to make a large purchase without paying interest for 12 to 18 months. Just be sure to pay it back before the hefty regular rate kicks in.
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Bottom line
Federal employees and uniformed service members can take out a TSP loan from their TSP retirement account with low rates and generous loan terms. Plus, they’re easy to qualify for, and there’s no credit check.
But they at least temporarily reduce your savings, may cause you to contribute less to your retirement account and there are a number of potential tax consequences. Explore your top personal loans and other options before taking out a TSP loan to find the best fit for your situation.
Frequently asked questions
Can you still get a TSP loan after leaving your government job?
No. Once you’ve left federal service, you’re no longer eligible to get a TSP loan. You also can’t get a new TSP loan if you’re a civilian worker in nonpay status, which might mean you’re on leave without pay or are furloughed.
If you have an existing TSP loan during an approved nonpay status, your payments will be suspended — but interest continues to accrue — until you resume pay status or one year passes, whichever comes first, in most cases.
Is it better to take a TSP loan or withdrawal?
In most cases, it’s better to take out a TSP loan rather than just withdrawing the money. This is especially true if you haven’t reached retirement age yet, because you’ll have to pay a 10% early withdrawal penalty plus taxes.
Can I repay my TSP loan early?
Yes. TSP loans don’t have prepayment penalties, so you are free to repay your loan in full at any time before it’s due. You also have the option to make extra payments on your loan, which helps you save on interest.
How long after paying off TSP loans can you get another?
You need to wait at least 30 days after paying off one TSP loan before you can request another one.
