Interest Rates
Like most loans (except maybe those from Mom and Dad), a 401(k) loan comes with interest. The rate is usually a point or two above the prime rate. Right now, the prime rate sits at 5.5%, so your 401(k) loan rate will come out between 6.5% and 7.5%.
Also question is, are you taxed on 401k loan?
Any money borrowed from a 401(k) account is tax-exempt, as long as you pay back the loan on time. … You do not have to claim a 401(k) loan on your tax return. As long as the loan is paid back in a timely manner, the interest attached to certain plans is the only tax consequence.
When you take out a 401(k) loan, you’re borrowing your own money, so there’s no lender to pull your credit score. When the plan disburses the loan funds to you, it doesn’t show up on your credit report, so it won’t add to your debt.
Also, how long do you have to pay back a 401k loan?
What happens if I have a 401k loan and quit my job?
If you quit your job with an outstanding 401(k) loan, the IRS requires you to repay the remaining loan balance within 60 days. Fail to repay within that time, and the IRS and your state will deem the balance as income for that tax year. You’ll need to pay income tax and face a 10% penalty tax in addition.