How to Apply for a 401k Loan

How to Apply for a 401k Loan. Although you have invested in a pension plan, you may find yourself in need of that money before your retirement. Many retirement plans (but not all) allow for a loan withdrawal. Borrowing from your pension is different then borrowing from a lender; taking a loan from your 401k is a little bit like borrowing money from yourself. However, consider the consequences and warnings before completing the steps to apply for a 401k loan.

Step 1

Verify with your company's human resources department or benefits representative that your pension plan allows for hardship loans.

Step 2

Request the forms to apply for the 401k loan and review the paperwork.

Step 3

Verify that you do qualify for a loan under the plan provisions.

Step 4

Complete the necessary paperwork needed by the retirement plan administrator.

Step 5

Attach any requested documentation.

Step 6

Photocopy everything you are sending to the administrator and keep a copy for yourself.

Step 7

Send or fax your paperwork to the specified location.

Step 8

Wait for the 401k loan papers to be sent.

Step 9

Sign and have the loan agreement notarized.

Step 10

Return the paperwork to the administrator.

Step 11

Await the disbursement of your loan.

Step 12

Remember your net income will change because of the repayment of the loan.


You may be allowed to borrow up to 50 percent of the pension balance. Interest on a 401k loan is comparable to the current prime rate.


Even if you use it as a home loan, a 401k loan is not tax deductible. Remember, not all pension plans allow for a loan withdrawal. If you leave your company before the terms of the loan have been met, you will be required to immediately repay the loan and will be subject to taxes and penalty.

Things You'll Need

  • Notary public

  • Copier

  • Loan forms

  • Envelope and stamp or fax machine

  • Required documentation

  • Plan specifics