Thread: loans

I would not take a loan on my TSP unless it is to buy a 1st home. I feel it would be a challenge for me to repay my own money (rationalizations) if there was another reason to take out a loan.

The bank will loan me money for vehicles, that is the only reason I wouldapply foraloan.

That is my opinion concerning my money.

Have a great week!

Mike

I guess it's okay to take out a tsp loan at 4% interest and pay off a credit card costing you 14-20%. But the key is....to pay of that tsp loan quick.



thanks for the reply

stebbins777 wrote:

I guess it's okay to take out a tsp loan at 4% interest and pay off a credit card costing you 14-20%. But the key is....to pay of that tsp loan quick.



thanks for the reply

I would certainly agree with the above especially beings all principle AND interest is paid right back into your account. Sure beats paying interest to someone else! Learning a valuable lesson and self discipline are the key. Bump up the contributions to your TSP account. Credit cards...........foooy cut’em up!

Cut and paste for tsp.gov

The interest rate you pay for the life of the loan is the latest available interest rate for the G Fund at the time your application is processed. The interest you pay on the loan will go into your TSP account, along with repayments of the loan principal. Visit Current Information on this Web site or call the ThriftLine to find out the current interest rate for TSP loans. Also, if you use the Loan Calculator on this Web site, the calculator will use the current rate automatically.

Stebbins, a TSP loan is the cheapest money you can borrow ( 4% vs. 14-22%). You must remember though you are "borrowing your retirement", so try to get the TSP loan paid ASAP. When I retire May06 I will be using about 1/2 of my TSP to get debt free. Good Luck !!!

I used a TSP loan for the down payment of my house about 12 years ago. The money was cheap to get, and payments have been easy to make . Best $ I have ever borrowed...

It'd make the most sense to borrow against the TSP in a bear market where you can't make much of a return on your money anyway.

In general though, I'd strongly advise against borrowing against retirement - this would short-change the inherent advantage of the account which is compounding over a long period of time.

I agree with Mike wholeheartedly. 2000-2002 would have been a good time to borrow, but I borrowed 13k in 2003, just when equities were making a comeback. I borrowed so that I could put 20% down on my home and knock a couple of points off of my mortgage. I’m still not certain how bad it hurt me. I was invested in the C, S, and I funds, with annual returns of 28%, 43% and 38% that I lost out on. I’m not an economic pro or even come close when it comes to all of this economic stuff, but I’m not too bad at percentages. Of course if you were invested 100% in the G-fund, which returned 4.11% in 2003 it probably would not be that big of a deal.



My recommendation is to weigh out all possible alternatives before making a decision to borrow from your retirement plan and then do so only as a last resort.



The good newswas that I paid it back in just over two years, but it was a hefty monthly payment to accomplish this task.

A loan sounds like a good deal, until you realize you are paying it back with after-tax dollars. Then those dollars are taxed again when you withdraw later in life. If you are in the 25% marginal braket, you could lose fifty cents on the dollar. Borrow and repay, borrow and repay, and soon your TSP is just a passbook account.

I borrowed some a while back in order to do just what you have in mind, paying off some consumer debt. I won't do it again.(Exception: medical emergency, bail.)

If you need the money, just reduce your contribution -- don't put it in there in the first place.Once it is there, leave it there.

Dave

I agree fully, and thanks for the reply,

God bless.

Yes, if you took a non-Thrift loan, you'd also be paying that off with after-tax dollars. And either way, if it's through a thrift loan, or if you don't take the thrift loan, you still pay the taxes on the withdrawals later.

My suggestion is if you do take the tsp loan, just take out the amount you would have had in the G fund anyway. When you pay it back, it's as if the money was just in the G fund the whole time. Don't borrow against the money you had in the S, C, or I funds.

VirginiaBob wrote:

Yes, if you took a non-Thrift loan, you'd also be paying that off with after-tax dollars.Â* And either way, if it's through a thrift loan, or if you don't take the thrift loan, you still pay the taxes on the withdrawals later.

My suggestion is if you do take the tsp loan, just take out the amount you would have had in the G fund anyway.Â* When you pay it back, it's as if the money was just in the G fund the whole time.Â* Don't borrow against the money you had in the S, C, or I funds.

This is a pretty stupid comment. Now I understand you're post in the other thread even more. DOH!! :shock: