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Find out how long it takes to be eligible for a loan from a thrift savings plan and what conditions need to be met. 3 min read.
Borrowing from your thrift savings plan might be a wise choice if you need additional money to cover a big purchase or an unforeseen expense. Through a TSP loan, members can access their retirement funds without having to undergo a credit check. It may take a few days to weeks after you apply for a TSP loan before you receive the money.
If your online application for a TSP loan is accepted, funds will be disbursed in three to thirteen business days. However, it may take several weeks for the application to be processed and approved if you mail in the necessary documentation for a TSP loan. The loan amount will be sent to you as a check or direct deposit.
What is a TSP loan?
Similar to a 401(k) loan, a TSP loan lets members of the plan take out loans against their retirement savings. It’s simple to qualify for a TSP loan because you’re taking out a savings account, but there are a few requirements you need to fulfill in order to be approved. For instance, you must be in “active pay” status, have contributed at least $1,000 to the TSP, and your TSP account cannot be subject to a court order.
There are two types of TSP loans i. e. general purpose and residential TSP loans. Similar to a personal loan, a general-purpose TSP loan can be used for any purpose and has a five-year repayment period. A residential TSP loan has a maximum repayment term of 15 years and can only be used for the purchase or construction of your primary residence.
How to get a TSP loan
By visiting My Account on the TSP website, you can submit an online application for a loan. gov website. To finish the loan application online, use the online application tool.
If you’re married, you’ll need to present your spouse’s signed consent form. Also, documentation containing the address of the house you are purchasing or building must be submitted with your application for a residential TSP loan.
If the loan application form needs to be printed, make sure to fill it out completely and include any additional documentation that may be needed. You can upload the completed form and any supplementary files to your TSP account. The TSP loan documentation can also be sent by mail or fax.
How long does it take to get a TSP loan?
Depending on how you applied for the loan, it may take a few days to weeks to receive the funds after submitting a TSP application. You should receive the funds in 3 to 13 business days if you submit the full loan application online. Applications sent by mail may take several weeks to be approved and processed, and the money may not be received for several weeks.
Following approval of the TSP loan, a mailed check for the amount will be sent to you. The proceeds of your general-purpose TSP loan application will be reduced by $50 as a processing fee. The amount of your loan proceeds will be withheld to cover the $100 processing fee if you applied for a residential TSP loan.
TSP loan eligibility requirements
To be eligible for a loan from your Thrift Savings Plan, you need to fulfill the following conditions:
Your account needs to contain a minimum of $1,000 in contributions and earnings that you have made yourself.
You have to be a member of the uniformed services or an active federal civilian employee. You will not be able to take out a loan against your TSP savings if you have departed the federal service.
You have to be receiving a salary from the federal service in order to be in active pay status. This is because TSP repayments are deducted from your paycheck. You can still take out loans from your TSP account if you are in active pay status but are no longer making contributions to the plan.
You have to have not paid back any kind of TSP loan within the last 30 working days.
One general-purpose loan and one residential TSP loan are allowed per borrower at a time.
It is required that you have not received a taxable distribution on a loan within the last 12 months, unless it was due to your termination from federal civilian service or your enrollment in the armed forces.
A court order or judgment cannot be against your TSP account.
How much can you borrow from TSP?
The minimum amount you can borrow from a TSP plan is $1,000. The maximum amount you can borrow from the retirement plan depends on several rules. Typically, the maximum TSP loan amount is the smallest of the following:
Your personal contributions and any related earnings in the TSP account you want to use for borrowing, less any balance owed on any outstanding TSP loans
fifty percent of your personal TSP contributions and related earnings, or $10,000, whichever is higher, less any outstanding loan balance
$50,000 less, if any, the largest amount you owed on a TSP loan during the previous 12 months
Therefore, the maximum amount you can borrow from a TSP plan is $50,000 based on these guidelines.
You have to begin repaying the loan to the plan as soon as you take out a loan against your TSP savings. Payroll deductions, in which the loan repayments are taken out of your paycheck over time, are typically used to repay loans. The loan payments are returned in the same ratio that was used to disburse your loan to your traditional and Roth TSP balances.
You have 90 days to pay off any unpaid balance if you have separated from the federal service and have an outstanding TSP balance. In the event that you are unable to pay the entire balance of your TSP loan, IRS will consider it a taxable distribution, and you will be responsible for income taxes and an early withdrawal penalty (as of 2010) if your income is below the poverty line.
FAQ
How long does TSP loan take to process?
You should receive the funds in 3 to 13 business days if you submit the full loan application online. Applications sent by mail may take several weeks to be approved and processed, and the money may not be received for several weeks. Following approval of the TSP loan, a mailed check for the amount will be sent to you.
How fast can I get my TSP money?
Following correct completion and submission, the processing of your request typically takes seven to ten business days. We disburse withdrawals each business day. You can check My Account at tsp. gov or give the ThriftLine a call to inquire about the progress of your withdrawal request, including if the money has been received.
Can you be denied a TSP loan?
Is it possible for a TSP loan to be rejected? Certainly, in the event that you don’t fulfill the eligibility requirements. To apply, you must be a federal employee or a member of the armed forces. Additionally, you must be a current federal employee and have a minimum balance of $1,000 in your TSP account.
How long will my TSP loan be in pending status?
If you successfully complete the online application process and are granted credit, loans can be completed in 7–10 days. A check will be mailed to your address of record. Processing of the Form TSP-20 by mail or fax typically takes up to ten business days. After that, a Loan Agreement (TSP-21) will arrive in the mail.
Read More :
https://www.tsp.gov/publications/tspbk04.pdf
https://meetbeagle.com/resources/post/how-long-does-it-take-to-get-a-loan-from-a-thrift-savings-plan