And about one-third of people who participate the plans borrow from them. If you ask your co-workers, you'll find that many of them think so, but they aren't that sure how the whole thing works. Let's try to clear some of the fog. Start with some facts. Unlike just about any other loan, there's no credit check.
Borrowers have five years to pay the money back.
If the loan has been used to purchase a home the law allows up to 30 years for repayment but many plans limit the time to 10 years. You'll be charged an interest rate that's considered competitive with other lenders. That's an IRS requirement. Often plan administrators set the rate at prime plus one percent. You won't pay taxes on the amount that you borrow.