• Can initiate on TSP website – no documentation needed
  • Cost: $50 loan fee – Minimum loan amount = $1,000, Maximum = 50% of own contributions and earnings on those contributions up to $50,000 – Interest rate based on G Fund average for prior month – October rate 4.25%. This rate is fixed for duration of the loan.
  • Once logged into TSP account, loan section shows maximum loan amount
  • Verify your bank information to receive direct deposit
  • Must specify loan term from 1 to 5 years but can do a one-time direct debit to payoff loan by contacting the TSP to receive a direct debit payoff amount
  • Can take out a second general purpose loan if meeting other account requirements

TSP Loan Awareness

Fixed costs are the $50 loan fee and the 4.25% loan interest. The third cost is an opportunity cost; this is what the loaned-out amount would’ve gained or lost if the loan wasn’t taken. In a TSP loan, the amount borrowed is temporarily removed from your investments and stops earning compound returns.

In the example below, a $10,000 TSP Loan’s fixed cost would be $85 for one month and $156 for three months. Also included is the variable opportunity cost, assuming an 8% annual account growth which is 0.67% for 1 month and 2.0% for three months.

For simplicity, the below example assumes no loan payments other than the total payoff at 1 and 3 months.

$10,000 TSP Loan

1 Month Loan

Fixed – Loan Fee: $50
Fixed – Loan Interest (4.25): $35
Opportunity cost assuming 8% annualized return: $67
Fixed loan cost & variable opportunity cost: $152

3 Month Loan

Fixed – Loan Fee: $50
Fixed – Loan Interest (4.25): $106
Opportunity cost assuming 8% annualized return: $200
Fixed loan cost & variable opportunity cost: $356

The opportunity cost could be higher or lower than the example, but borrowers should strive to pay off the loan in full as soon as possible, as the longer the time frame the higher probability stock markets will be higher.

The annualized 8% return is based on the past 20-year return of the TSP L 2040 fund.

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