Q:

What is a thrift savings plan loan?

A:

Quick Answer

A thrift savings plan loan allows current federal employees or military service personnel to borrow money from their thrift savings plan, or TSP, according to TSP.gov. The amount borrowed from the TSP cannot be more than the amount of contributions and earnings from those contributions.

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Full Answer

As of March 2015, TSP loans come in two types: a general purpose loan and a residential loan, reports TSP.gov. A person can use the general purpose loan for any reason, and it must be repaid within one to five years. The residential loan can only be used for buying or constructing a house, and the borrower has to pay it back within one to 15 years. It can't be used for renovations, building an addition, buying of land or refinancing.

Before borrowing money from the TSP, a person must meet certain eligibility requirements for the loan, TSP.gov states. Borrowers must be employed by and getting a current pay check from the federal government or armed services. There must be at least $1,000 in the TSP account, as this is the minimum loan amount granted. Also, the person can only have one general purpose loan and one residential loan out of the account at one time. If a loan of the same type was paid in full within the past 60 days, the person is not eligible for a TSP loan.

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