A 403(b) loan lets you borrow against your own retirement savings — but it comes with real costs. This calculator shows your repayment schedule, total interest, and the long-term impact of removing money from your tax-advantaged account.
Please enter a valid account balance, loan amount, and interest rate.
| Detail | Amount |
|---|---|
| Loan Amount | — |
| IRS Max Allowed | — |
| Payments Per Year | — |
| Total Number of Payments | — |
| Total Interest | — |
| Estimated Growth Foregone | — |
| Total True Cost of Loan | — |
Borrowing From Your 403(b) Looks Free — It Isn’t
The pitch sounds appealing: borrow up to 50% of your vested balance, pay yourself back with interest, no credit check, no bank approval. But the “you’re paying interest to yourself” framing glosses over a real cost that doesn’t show up in the loan paperwork. The money you remove from your 403(b) stops growing tax-deferred the moment it leaves your account. On a $30,000 loan over five years in an account earning a historical average return, the foregone growth can easily exceed the loan interest itself — making the “free loan” meaningfully more expensive than it appears.
This calculator quantifies both the repayment side and the opportunity cost side so you can see the full picture before you submit that loan request.
How the 403(b) Loan Calculator Works
Fill in your account balance, loan amount, interest rate, term, and an expected account growth rate. The calculator will show your per-period payment, total interest paid back, and — critically — the estimated growth your loan amount would have generated if it had stayed invested.
Entering Each Field Correctly
- Account balance: enter your current vested account balance. If your full balance isn’t fully vested, use only the vested portion — that’s what the IRS cap is calculated against.
- Loan amount: the IRS limits 403(b) loans to the lesser of $50,000 or 50% of your vested balance. The calculator will automatically apply the lower of your requested amount and the IRS maximum.
- Interest rate: most 403(b) plans use the prime rate plus 1–2 percentage points. Check your plan documents or call your plan administrator for the current applicable rate.
- Loan term: general-purpose loans have a maximum five-year repayment term. Loans used to purchase a primary residence can have longer terms — check your specific plan for that limit.
- Payment frequency: most workplace plans deduct payments from payroll — bi-weekly if you’re paid every two weeks. Some plans allow monthly. Use the frequency that matches how your plan will actually collect payments.
- Expected account growth rate: use a conservative long-run estimate — 5–7% is a reasonable assumption for a diversified portfolio. This figure drives the opportunity cost calculation.
The Two Costs the Calculator Shows You
Loan interest is the straightforward component — the total amount you’ll pay above the principal during the repayment period. Opportunity cost is the less visible but often larger number: the estimated investment return you give up because that money is no longer in your account compounding. The calculator adds both together to show you the true total cost of the loan.
Why the Opportunity Cost Matters More Than Most People Think
A 403(b) is a tax-deferred vehicle. Every dollar inside it grows without being reduced by annual capital gains or income taxes until withdrawal. That tax-deferred compounding is the primary financial advantage of the account. When you remove $25,000 for five years, you don’t just lose the return on that $25,000 — you lose the return, and you lose it on a tax-advantaged basis. If your account grows at 7% annually, that $25,000 would have become roughly $35,000 in five years. That $10,000 difference is your true cost in addition to the interest you pay.
Example: $85,000 Balance, $25,000 Loan, 6% Rate, 5-Year Term
IRS maximum: $42,500 — loan of $25,000 is within limits. Monthly payment at 6% for 60 months: approximately $483. Total repaid: $28,980. Total interest: $3,980. Estimated growth foregone (7% assumed return): $10,117. True total cost of the loan: $14,097 on a $25,000 borrowing. That’s a real cost that a personal loan at 10% for the same term would actually beat in total dollar terms for some borrowers, depending on their tax rate on loan interest. According to the IRS retirement plan loan guidelines, loans that are not repaid on time are treated as taxable distributions subject to income tax and potentially the 10% early withdrawal penalty.
When a 403(b) Loan Is and Isn’t the Right Move
Context matters. There are situations where a 403(b) loan is a reasonable tool — and situations where it signals a deeper financial problem that the loan will only delay.
The Job Change Problem Nobody Mentions at Loan Origination
If you leave your employer — voluntarily or involuntarily — while a 403(b) loan is outstanding, most plans require full repayment within 60–90 days. If you can’t repay in that window, the outstanding balance is treated as a distribution: fully taxable in the year of separation, plus the 10% early withdrawal penalty if you’re under 59½. A $25,000 loan that becomes a distribution could cost $8,000–$10,000 in taxes and penalties depending on your bracket. This risk is underweighted by almost everyone who takes a 403(b) loan. If there’s any possibility of a job change in the near term, think carefully before borrowing. The Department of Labor’s retirement plan participant guidance covers loan default treatment in detail.
One Scenario Where It Actually Makes Sense
A short-term cash gap — a medical bill, a home repair, a tax payment — where you have a clear and credible repayment plan and strong job security, and where the alternative is high-interest credit card debt at 20%+. In that narrow scenario, the 403(b) loan can be the least-bad option. But it requires discipline: the loan must be fully repaid, contributions must not be stopped during repayment, and job continuity must be reasonably assured.
What 403(b) Participants Ask Before Taking a Loan
What is the maximum I can borrow from my 403(b)?
The IRS limits 403(b) loans to the lesser of $50,000 or 50% of your vested account balance. If your balance is $60,000, your maximum loan is $30,000. If your balance is $150,000, your maximum is $50,000. Some plans impose lower limits than the IRS maximum — check your plan document or Summary Plan Description for your plan’s specific rules.
Is the interest I pay on a 403(b) loan tax-deductible?
No. Although you’re paying interest back to yourself, interest on a 403(b) loan is not tax-deductible — not as mortgage interest, not as investment interest, not as any other deductible category. You also pay that interest with after-tax dollars. When you eventually withdraw the repaid amount in retirement, you’ll pay income tax on it again. This double-taxation aspect is a real cost that the “paying yourself interest” framing ignores.
What happens if I miss a loan payment?
Most plans offer a cure period — usually the end of the calendar quarter following the missed payment — during which you can make up the missed amount without triggering a default. If you miss the cure window, the outstanding loan balance is declared a deemed distribution, subject to income tax and the 10% early withdrawal penalty if you’re under 59½. Check your plan’s specific cure period rules with your plan administrator.
Can I have more than one 403(b) loan outstanding?
It depends on your plan. Some plans allow multiple loans; others allow only one at a time. Regardless, the $50,000 IRS cap applies to the combined total of all loans from all plans with the same employer within any 12-month period. If you took a loan in the past 12 months that has since been repaid, the highest outstanding balance during that period still reduces your maximum on a new loan.
Does taking a 403(b) loan affect my credit score?
No. 403(b) loans are not reported to credit bureaus and do not appear on your credit report. There’s no credit check, and repayment history has no effect on your credit score. The loan is secured by your retirement account balance, not by your creditworthiness.
Should I stop contributing to my 403(b) during repayment?
No — and this is one of the most common mistakes participants make. Stopping or reducing contributions while repaying the loan compounds the damage: you lose future tax-advantaged growth on both the loan amount and the missed contributions, and you may lose employer matching on contributions you skip. Maintain your regular contribution rate during the full repayment period even if it feels tight.
What is the difference between a 403(b) loan and a hardship withdrawal?
A loan must be repaid with interest. A hardship withdrawal is a permanent removal of funds from your account — no repayment required — but it is immediately taxable as income and subject to the 10% early withdrawal penalty if you’re under 59½. Hardship withdrawals also typically prevent you from contributing to the plan for six months. The loan is almost always the better option for participants who qualify for both, purely on financial grounds.
How soon can I borrow from my 403(b) after starting employment?
This is entirely plan-specific. Some plans allow loans from day one of participation; others impose a waiting period of 6–12 months. Additionally, loans can only be taken against your vested balance — employer matching contributions that haven’t yet vested are not available for borrowing. Check your plan’s vesting schedule and loan eligibility rules before making any assumptions about timing.