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Thread: TSP Loan Rate

  1. #13

    Join Date
    Feb 2007
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    San Diego, CA
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    Default Re: TSP Loan Rate

    Quote Originally Posted by Scrappy View Post
    PLEASE clarify:

    What do you mean by "have to" invest in the G fund?
    And what do you mean "they do NOT gain the interest from the 'G Fund'"
    When you say they gain nothing does that mean the payment amount and shares purchased when a payment is made is the same no matter what the TSP loan rate is?
    I know not of what Boghie speaks of, according to the booklet, if you take a loan from TSP:
    When you borrow from your TSP account, your account balance is decreased by the amount of your loan. If your loan account is invested in more than one fund, your loan is deducted on a proportional basis from the employee contributions (and earnings on those contributions) that you have in each fund.
    When you pay back your loan:
    When you repay your loan, your payments are invested in your TSP account according to your most recent contribution allocation.

    Page 6 of the booklet.

    The reason I post the interest rate is to show people thinking about a loan what the interest rate will be if they locked in at that time.

    Hopefully this helps!
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund

  2.  
  3. #14

    Default Re: TSP Loan Rate

    Quote Originally Posted by Frixxxx View Post
    I know not of what Boghie speaks of, according to the booklet, if you take a loan from TSP:
    When you borrow from your TSP account, your account balance is decreased by the amount of your loan. If your loan account is invested in more than one fund, your loan is deducted on a proportional basis from the employee contributions (and earnings on those contributions) that you have in each fund.
    When you pay back your loan:
    When you repay your loan, your payments are invested in your TSP account according to your most recent contribution allocation.

    Page 6 of the booklet.

    The reason I post the interest rate is to show people thinking about a loan what the interest rate will be if they locked in at that time.

    Hopefully this helps!
    Thank you sir! that helps a lot.

    My main question remains though. Why would a person want the rate to be low?

    Wouldn't a higher rate equate to a greater return to the account?

    I would think for some people, the higher the TSP loan rate the better?

  4.  
  5. #15

    Join Date
    Feb 2007
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    Default Re: TSP Loan Rate

    Quote Originally Posted by Scrappy View Post
    Thank you sir! that helps a lot.

    My main question remains though. Why would a person want the rate to be low?

    Wouldn't a higher rate equate to a greater return to the account?

    I would think for some people, the higher the TSP loan rate the better?
    Good Question-

    Remember a loan is paid back with AFTER tax dollars. So your interest rate is also AFTER tax dollars. The higher the rate, the more YOU have to pay back!

    Anyone else see it different?
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund

  6.  
  7. #16

    Join Date
    Sep 2008
    Location
    Kentucky
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    4,706

    Default Re: TSP Loan Rate

    The bigger issue IMO is the difference between what you can loan money to yourself for and what the bank will loan it to you for.
    If the TSP interest rate is 3.2 and the bank is 4.2 is it worth taking ?$ out of the investment stream vs. paying the bank the money. When bank interest rates are high it is a no brainer. A little more brain work when they are low or you are able to obtain a low rate.
    In Dog Beers I've only had two.

  8.  
  9. #17

    Join Date
    Feb 2007
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    Default Re: TSP Loan Rate

    Quote Originally Posted by WorkFE View Post
    The bigger issue IMO is the difference between what you can loan money to yourself for and what the bank will loan it to you for.
    If the TSP interest rate is 3.2 and the bank is 4.2 is it worth taking ?$ out of the investment stream vs. paying the bank the money. When bank interest rates are high it is a no brainer. A little more brain work when they are low or you are able to obtain a low rate.
    There is a calcualtor out here that shows how to determine which is more viable.....credit cards vs TSP loan....And I can't find it anywhere.....

    Help me Obiwan Kenobe....your my only hope!
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund

  10.  
  11. #18

    Join Date
    Feb 2007
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    Default Re: TSP Loan Rate

    Quote Originally Posted by Frixxxx View Post
    There is a calcualtor out here that shows how to determine which is more viable.....credit cards vs TSP loan....And I can't find it anywhere.....

    Help me Obiwan Kenobe....your my only hope!
    Remembered...Corepuncher's Signature has the spreadsheet!
    Woohoo post 2222!!!!
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund


  12.  
  13. #19

    Join Date
    Feb 2007
    Location
    San Diego, CA
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    Default Re: TSP Loan Rate

    Interest Rate: The current interest rate for new loans is 3.375%, which is the current G Fund interest rate.

    G Funders----REJOICE!!!!!!
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund

  14.  
  15. #20

    Default Re: TSP Loan Rate

    I took out the max loan for 5 years to pay off my Parent Plus loans for my kids college. While I would have made a 60% + gain if I had left the money in the S fund, I just considered it a portfolio diversifiacation ( aobut 25% in the equivelent to the G fund). I killed the 8.5% loans and am paying my TSP account back as 3.25%, so I figure that I enjoying a spread of about 12%. That's not a bad return anytime.

    So, it just depends on what your circumstances are. I would be enjoying even a better situation if the market would just tank and my TSP account could lose 50% again. Then my decision to pull money out to pay loans would seem like sheer genius and I would have shielded that 50k from huge losses!
    Official Retirement Date: 06-31-2014!

  16.  
  17. #21

    Join Date
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    Default Re: TSP Loan Rate

    I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

    We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

    He would have paid 600/month for 30 years if he paid the credit cards level.

    He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....

    Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
    Tracker =
    100%- I Fund

  18.  
  19. #22

    Join Date
    Mar 2006
    Location
    Raleigh, NC
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    3,124

    Exclamation Re: TSP Loan Rate

    A loan rate of 3.375% means a 'G Fund' return of 3.375%.
    Whooopeeeeee...

    But, that is very bad news for a government that borrowed $1.5 Trillion last year

    Looks like the Bond Funds are pulling on the leash, eh...
    Lookin' up at the 'G Fund'!!!

  20.  
  21. #23

    Default Re: TSP Loan Rate

    Quote Originally Posted by Frixxxx View Post
    I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

    We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

    He would have paid 600/month for 30 years if he paid the credit cards level.

    He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....

    Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....
    Good work!
    Official Retirement Date: 06-31-2014!

  22.  
  23. #24

    Join Date
    Sep 2004
    Location
    Missouri
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    8,619

    Thumbs up Re: TSP Loan Rate

    You Sir, are a good citizen and co-worker!

    Quote Originally Posted by Frixxxx View Post
    I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

    We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

    He would have paid 600/month for 30 years if he paid the credit cards level.

    He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....

    Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....
    Socrates: "Democracy, which is a charming form of government, full of variety and disorder, and dispensing a sort of equality to equals and unequaled alike."

  24.  
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