Types of Thrift Savings Plan Loans
There are two types of Thrift Savings Plan Loans:
- General purpose loan with a repayment period of 1 to 5 years. No
documentation is required.
- Residential loan with a repayment period of 1 to 15 years. Documentation is
required.
A residential loan can be used only for the purchase or
construction of a primary residence. The residence can be a house, condominium,
shares in a cooperative housing corporation, or a townhouse, boat, mobile home,
or recreational vehicle, but it must be used as your primary residence. The
residence must be purchased (in whole or in part) by you. You can obtain a
residential loan for constructing a new residence or purchasing an existing
residence, but not for refinancing or prepaying an existing mortgage, for
renovations, for buying out another person's share in your current residence, or
for the purchase of land only.
You may have only one general purpose loan and one residential loan
at any one time.
Minimum loan amount. The smallest amount you can borrow is
$1,000.
Maximum loan amount. TSP and Internal Revenue Service (IRS)
rules limit the amount you can borrow. The principal amount cannot exceed the
smallest of the following:
- your contributions and their earnings in your civilian or
uniformed
services account (that is, the account from which you are taking
the loan), not including any outstanding loan balance (the Contributions and
Earnings Test);
- 50 percent of your total vested account balance (including any outstanding
loan balance) or $10,000, whichever is greater, minus
any outstanding loan
balance (the IRS Vested Balance Test); or
- $50,000 minus your highest outstanding loan balance, if any, during the last
12 months (the IRS $50,000 Test).
If you have a civilian and a uniformed services account, the combined account
balances and loan balances will be used to calculate Items 2 and 3.
Your account balance is recalculated at the end of each business day based on
the daily share prices. Therefore, your maximum loan amount may also change each
day.
When you borrow from your TSP account, your account balance is decreased by
the amount of your loan. If your loan account is invested in more than one fund,
your loan is deducted on a proportional basis from the employee contributions
(and earnings on those contributions) that you have in each fund.
When you repay your loan, your payments are invested in your TSP account
according to your most recent contribution allocation.
The loan interest rate you pay for the life of the loan is the G Fund
rate at the time your application is processed.
You must be in pay status to get a TSP loan because you must repay your loan
with payroll deductions. Therefore, if you are not currently receiving pay, you
will not be eligible for a TSP loan. The TSP refers to this status as
"nonpay."
- For civilian TSP participants, nonpay status includes leave without
pay
and furlough.
- Most uniformed services members will never be in nonpay status.
However,
if you are a member of the Ready Reserve and your drilling intervals are
irregular (that is, other than monthly) and therefore you do not receive pay
each month, you are considered, for TSP purposes, to be in nonpay status during
the months you do not drill. When you return to pay status, you may apply for a
TSP loan.
By law, your spouse has certain rights to your TSP account.
Therefore, when you request a loan, you must indicate whether you are
married, even if you are separated from your spouse.
If you are married, the following rules apply:
- If you are a FERS participant or a member of the uniformed serv-ices, your
spouse must consent to your TSP loan by signing the Loan Agreement that the TSP
will send you (or that you print from the TSP Web site, if you request a loan on
line).
- If you are a CSRS participant, the TSP must notify your spouse when you
apply for a loan. Exceptions may be approved under certain very limited
circumstances. For more information, refer to the Exception to Spousal
Requirements form, which is available from the TSP Web site (www.tsp.gov) , or from your agency or
service.
Source: TSPBK04 (6/06)
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Overview - CSRS
