Are there taxes or penalties involved with a loan?
There aren’t taxes or penalties when you initially take a loan. Taxes or penalties only come into play if you leave your employer without repaying your loan and/or if you don’t repay your loan on time while you are still employed. If you decide to leave your employer, you must repay your loan in full immediately or within a certain amount of time (depending on the provisions of your plan). If you are under age 59½ and you do not repay your loan within this certain time frame, the pre-tax portion of your loan is then considered an “offset distribution.” This distribution is subject to a 10 percent early withdrawal penalty as well as current income taxes unless you rollover the outstanding balance to an IRA or another employer-sponsored retirement plan within 60 days. Some employers treat loan defaults differently, and some charge fees for taking loans. • How long does it take to process a loan? This depends on your employer’s plan. It generally takes 7 to 10 business days to process a l
