You can have up to two TSP loans outstanding at one time, and no more than one of them can be a residential loan.1eCFR. 5 CFR Part 1655 – Loan Program That limit applies per account. In practice, your two active loans can be two general purpose loans, or one general purpose loan paired with one residential loan. Two residential loans at the same time is not allowed.
The Two Loan Types Behind the Cap
Because the cap treats residential loans differently, it helps to know which is which.
A general purpose loan can be used for any reason and requires no documentation of how you plan to spend the money. Repayment runs from 12 to 60 months.1eCFR. 5 CFR Part 1655 – Loan Program
A residential loan can only be used to buy or build your primary residence, and you have to submit documentation proving the purchase or construction. The repayment term stretches up to 180 months.1eCFR. 5 CFR Part 1655 – Loan Program
Both types carry a fixed interest rate equal to the G Fund rate from the month before you request the loan, and that rate stays put for the life of the loan. The processing fee is $50 for a general purpose loan and $100 for a residential loan, taken from the proceeds.2Thrift Savings Plan. TSP Loans
When a Loan Slot Opens Up Again
Once a loan is fully repaid or closed, the slot it occupied becomes available, but not instantly. Two waiting periods apply, and you have to satisfy both.
At least 30 business days must pass after the full repayment of any loan before you can apply for a new one.2Thrift Savings Plan. TSP Loans On top of that, at least 60 calendar days must pass after paying off a general purpose loan before you can request another general purpose loan, and the same 60-day rule applies to a second residential loan after a residential loan is paid off.3Regulations.gov. TSP Loan Eligibility During Government Shutdowns
Eligibility to Fill a Slot
Having a free slot does not by itself entitle you to a loan. To qualify, all of the following must be true:
- You are currently employed by the federal government or serving in the uniformed services, since loan payments run through payroll deduction.2Thrift Savings Plan. TSP Loans
- You are in pay status and eligible to make TSP contributions.
- Your account holds at least $1,000 in employee contributions and associated earnings.2Thrift Savings Plan. TSP Loans
- You have not had a TSP loan declared a taxable distribution within the past 12 months, unless that distribution came from separating from federal service.3Regulations.gov. TSP Loan Eligibility During Government Shutdowns
- Your account is not frozen by a retirement benefits court order or a child support legal process.4eCFR. 5 CFR Part 1653 – Court Orders and Legal Processes Affecting Thrift Savings Plan Accounts
How Much a Second Loan Can Actually Be
Having two slots open does not mean you can borrow two full loans’ worth. The maximum you can borrow at any time is the smallest of three amounts, and one of those amounts specifically penalizes recent borrowing.
- Your available employee balance: the portion of your account from your own contributions and their earnings, minus any outstanding loan principal.5eCFR. 5 CFR 1655.6 – Amount of Loan
- 50% of your vested balance (or $10,000, whichever is greater), minus outstanding loans.5eCFR. 5 CFR 1655.6 – Amount of Loan
- $50,000 minus your highest outstanding loan balance from the past 12 months. If you carried a $20,000 balance at any point in the last year, your ceiling drops to $30,000, even if you have already repaid that earlier loan in full.6Internal Revenue Service. Issue Snapshot – Borrowing Limits for Participants With Multiple Plan Loans
The minimum loan amount is $1,000.5eCFR. 5 CFR 1655.6 – Amount of Loan Only your own contributions and their earnings are available for a loan. Agency or service matching contributions and their earnings are off-limits.2Thrift Savings Plan. TSP Loans Money invested in the TSP mutual fund window has to be moved back into a core TSP fund before it can be borrowed.
Foreclosure, Separation, and Your Slot Count
Leaving federal service does not automatically close your loan. Payroll deductions stop, but you can keep paying by check, money order, or recurring direct debit, pay the balance off in full, or let the loan foreclose.2Thrift Savings Plan. TSP Loans If you make no payments within 90 days of your reported separation, the TSP forecloses the loan and treats the outstanding balance and accrued interest as taxable income. If you are under age 59½, a 10% early withdrawal penalty may also apply.
A foreclosed loan declared a taxable distribution locks you out of new TSP loans for 12 months (unless the distribution resulted from separating), so the slot exists on paper but you cannot use it during that window.3Regulations.gov. TSP Loan Eligibility During Government Shutdowns
Reinstatement After Military Service
If a loan was foreclosed because you left civilian pay status to perform military service, you can request reinstatement within 90 days of returning to civilian service or pay status. Reinstatement is only granted if the loan being restored would still leave you within the standard limits: no more than two outstanding loans, with no more than one being residential.7eCFR. 5 CFR 1620.45 – Suspending TSP Loans, Restoring Post-Employment Distributions, and Reversing Loan Foreclosures In other words, the two-loan cap and the single-residential rule govern reinstatement the same way they govern a new loan.
Should You Use Both Loan Slots
The cap tells you what is allowed, not what is wise. A TSP loan can look inexpensive because you pay the interest back to your own account, but the money you borrow leaves your invested balance while the loan is outstanding. During that time, the borrowed portion effectively earns the G Fund rate you are being charged instead of whatever your chosen funds produce. If your other TSP investments outperform the G Fund rate over the life of the loan, you finish with less in your account than if you had never borrowed. That gap widens the longer the loan runs, so filling both slots, especially with a 15-year residential loan alongside a general purpose loan, magnifies the lost growth well beyond the $50 or $100 processing fee.