RSSA Brief Introduction to Thrift Savings Plan Loans
Jan 24
Investing federal thrift savings plan Comments Off
Many participants in the federal Thrift Savings Plan don’t know that you can take out a loan against your TSP account. When applying for a loan, the plan administrators consider your TSP account balance (fair market value). The TSP board allows two types of loans: residential and general purpose. A residential loan must be used for, you guessed it, the purchase or construction of your primary residence. Like a mortgage, it requires documentation, and it has a repayment term of 1 to 15 years. General purpose TSP loans on the other hand can be obtained without any documentation, and the proceeds may be used to pay for anything you desire. Like other short term lines of credit, these loans need to be paid back within 1 to 5 years.
If you do decide to take out a TSP loan, you’re not the only one. Far from it. An increasing number of TSP participants are relying on this option. As of August 2011, there were 891,341 loans outstanding. The average loan amount was $8,919. The number of loans and total loan amount outstanding is also on the rise, probably a reflection of the challenging economic times we live in. And the U.S. government after all is everyone’s favorite “lender of last resort.”