If you repay on time, the loan is shielded from taxes and penalties. A typical rate is prime or prime plus one percentage point. To further sweeten the deal, you pay the loan and interest back to yourself. To see what this means in terms of real numbers, test some scenarios below. But there are disadvantages.
Most plans have a five-year repayment window.
If you cannot repay, your loan is considered in default and the government treats the outstanding balance as a taxable withdrawal. Plans can charge a one-time fee, maintenance fee, or a combination. Each plan may have different fee structures, so review your plan rules before you borrow. Talk to the people at your credit union about other loan options .