A 401(k) loan allows you to borrow against your vested 401(k) balance and pay back the amount plus interest to your account over a specified period. Instead of paying the money back to a bank or lender, you're repaying it to your own retirement account.
While we understand you may need to borrow money from your 401(k), we encourage you to explore other options to avoid cutting into your retirement savings. Before moving forward, make sure you understand the eligibility requirements and risks.
Pro tip: You can find the full Loan Terms & Conditions in your participant dashboard under Documents > Resource Library in the Plan & account information section.
When you take out a loan from your 401(k), you'll get terms similar to other loans, including the amount you're borrowing, the interest rate, and the repayment timeline.
Key difference from other withdrawals: Unlike other retirement account withdrawals, you do not have to pay taxes or penalties as long as you repay the loan according to the repayment terms.
No credit check required: Your credit score won't be checked or affected when you apply for a 401(k) loan.
To qualify for a 401(k) loan, you must meet all of the following requirements:
You're currently employed with the company sponsoring your Gusto 401(k) plan
You have a vested account balance of at least $2,000
You do not have any other outstanding loans with Gusto Retirement (including any non-repaid deemed distributed loan)
You're not a participant in a Starter 401(k) plan
Note: Gusto 401(k) plans limit participants to one outstanding loan at a time. If you have an outstanding loan, you can pay it off and then request a new one.
The amount you can borrow depends on your vested balance and your loan history.
Minimum: The minimum loan amount is $1,000.
Maximum: The maximum amount depends on your account balance and whether you've had another loan in the past 12 months.
The formula for determining the maximum is the lesser of:
50% of your vested balance, or
$50,000, minus the highest outstanding loan balance in the past 12 months
You cannot roll over a loan from another plan into your Gusto 401(k), even if both plans are with Gusto Retirement.
Before borrowing from your retirement savings, understand the following risks.
If you do not repay the loan: If you do not repay the loan, including interest, according to the loan terms, the loan will be considered a deemed distribution. Any unpaid amounts then become taxable and may be subject to a 10% early distribution penalty.
If you leave your job: If you leave your employer for any reason, you will be required to repay any outstanding loan balance in full within 90 days. If you do not repay it, your loan will be treated as a taxable distribution and may be subject to a 10% early distribution penalty. You will not have the option to roll over your loan to another employer plan.
If your employer terminates the plan: If your company terminates the 401(k) plan, you will need to pay off your remaining loan balance, or it will be treated as a taxable distribution.
Lost investment growth: You might lose out on compounding market returns to grow your retirement savings while the borrowed amount is out of your account.
Loans are repaid through payroll deductions over a set period, with interest returned to your account.
You'll pay back the borrowed balance with interest, which is 1 percentage point above the current prime rate. All interest is returned directly to your account for your benefit.
Loans must be paid back within:
5 years for general-purpose loans, or
10 years if the loan is for the purchase of a primary residence
You can choose a shorter length of time if you prefer.
For loan terms beyond 5 years, you'll need to submit one of the following documents to Gusto Retirement along with your loan request:
A copy of your home purchase agreement signed by you and the seller, including the closing date and balance of the purchase price, or
A mortgage contract signed by you and the seller
Important: Your loan origination date must fall within 90 days before or after the closing date of your home purchase to qualify for a longer loan term.
You must repay the loan in equal payments that consist of both principal and interest. Payments are typically made through payroll deductions according to your payroll schedule (but must be at least quarterly).
You can make additional payments or fully pay off your loan ahead of schedule through the Loans page of your participant dashboard. This does not change your regular payment schedule—it simply means you'll pay off the loan sooner.
You can pause repayments in 2 specific circumstances: when you're out on a bona fide leave of absence or qualified military service leave.
Note: You cannot change your repayment schedule or re-amortize your loan repayments.
If you miss a loan payment, you'll have 90 days from the date of the missed payment to make it up. This is called the cure period.
Any new payments received after a missed payment will be applied to the oldest outstanding payment. If you have a missed payment that is not made up by the end of the cure period, the entire remaining unpaid loan balance will be deemed distributed and become taxable.
To apply for a loan, choose the path that matches how you signed in, then follow the steps.
Sign in to Gusto and go to Benefits > Active Benefits > 401(k) > Manage.
Go to the Move money tab and select Take money out.
Under See my options, select Withdraw or borrow.
If you're eligible for a loan, select that option and enter the purpose or reason for your loan request.
Input the amount you want to withdraw, then select Calculate.
Sign in directly at the Gusto Retirement sign-in page.
Select Money movement in the main navigation.
Under the menu, select Move money out.
Select Withdraw or borrow.
Enter the purpose or reason for your loan request.
Input the amount you want to withdraw, then select Calculate.
You’ll see all the withdrawal options available to you, along with important information about each. If you’re eligible for a loan, select that option on the page. If you are not eligible, the loan option will be grayed out and includes an explanation of why.
You’ll then be provided with important terms or details regarding a 401(k) loan. Once you’ve read through the information, click the button to move forward, and you’ll be guided through the application process
Once you submit a loan request, you can track the status on the Activity page under Move money. You'll also get email notifications as you hit different milestones in the loan process, like when your application is approved or when the funds are on the way.
To keep your 401(k) account secure, ACH distributions can only go to bank accounts held under your legal name, matching the name on your Gusto Retirement account. If your bank account name is different, you can reapply with a different bank account or request a check payment instead of an ACH transfer.
The loan application process can take around one month from when you apply to when you receive your funds. We encourage you to submit your application in advance of when funds are needed to allow enough time for processing and delivery.
Application review: 1–7 business days
Once you submit your loan application, it will be reviewed. This generally takes about one business day. However, if there are any questions about your application or if further documentation is needed because you're purchasing a primary residence, additional review time may be required. This further review typically takes 5–7 business days but may be longer, depending on the documentation needed.
If your application is approved, you'll receive an email notification that your promissory note is available for your review and signature. This will all be completed electronically.
Important: The promissory note will expire after 14 days. If you do not review and sign the document before it expires, you will need to restart the loan request process.
Loan processing: 7 business days
After you accept the promissory note terms, it typically takes about 7 business days for your loan to be finalized.
Fund distribution and delivery: 2–10 business days
A final email will be sent when your funds are ready for distribution. How long it will take to receive your funds depends on the delivery method you selected:
Check delivery: Expect about 7–10 business days to receive checks through USPS mail
Direct deposit/ACH delivery: Allow 2–3 business days for the funds to settle in your bank account
Note: If you're taking a loan from both your pre-tax and Roth accounts, you'll receive two separate checks or deposits.
Your loan status reflects where your loan is in its lifecycle — from application to active repayment to closure. Some statuses are informational, while others may require action from you or your employer.
You can find status updates for your loan on the Loans page of your participant dashboard.
Loan status
Meaning
Pending
Your loan application has been approved and will be distributed once the promissory note is signed. Learn more about the loan processing timeline.
Canceled
You requested a loan but canceled it before it was completed and distributed to you.
Active — Good standing
You have an active loan you are repaying, with no missed payments or other issues.
Active — Missed payments
You have an active loan you are repaying, but you have missed payments. This is typically due to the payments not being properly pulled or set up by your employer through payroll. Learn more about why missed payments may occur and how to make them up.
Active — Deem distributed
You have an active loan with missed payments that were not corrected on time. As a result, the loan was deemed distributed but is still considered open.
Active — Due in full
You have an active loan, but you no longer work for the employer sponsoring the plan. You must repay the loan in full to avoid the loan amount being offset. Learn about loan offsets.
Active — Overpayment
You have a loan that you repaid in full, and too much was repaid. This is typically caused by payroll deductions not stopping on time, or you made a payment outside of payroll that was more than the payoff amount. No action is required on your part — Gusto Retirement will automatically correct the overpayment, allowing the loan to close. This process can take a couple of weeks, and you will not be able to apply for a new loan until this process has been completed.
Active — Ready to close
You have a loan that has been repaid in full, and the system is completing the steps needed to close the loan. This process can take up to a week after the final payment has cleared.
Suspended — Military/bona fide
You have an active loan with repayments suspended because you are on active military leave or a bona fide leave of absence. Find more information about loan suspensions.
Suspended — Pending full plan transfer
You have an active loan with repayments suspended because your employer is moving your plan to a new service provider. Your employer should still be collecting these payments and sending them to the new service provider. Learn more about loans and changes in service providers.
Suspended — Unresponsive sponsor
You have an active loan, but the plan sponsor has stopped providing Gusto Retirement with any information regarding the plan. The plan is being evaluated for inclusion in the Department of Labor's Abandoned Plan Program. This program can take up to two years to complete, and your loan will be suspended (no repayment allowed and it will not be deemed distributed) until either the plan sponsor responds or the Department of Labor (DOL) accepts the plan into their program.
Closed — Paid in full
You had an active loan that you repaid in full.
Closed — Offset after deemed
You had an active loan that had been deemed distributed in the past, but has now been offset. Find more information about deemed distributions and offsets.
Closed — Offset
You had an active loan that was not repaid but was offset instead. Find more information about offsets.
Closed — Transferred
You had an active loan, but the plan was transferred to a new service provider or merged into another plan. All future loan activity will take place with the new provider or plan. Learn about loans and changes in service providers.
While 401(k) loans are typically paid through payroll deductions in accordance with your amortization schedule, you can also submit payments via check or online through your bank account. You may choose to make additional payments to pay off your loan sooner or to catch up on your payments if you're behind.
To make a manual loan payment, choose the path that matches how you signed in.
Sign in to Gusto and go to Benefits. Under Savings, find 401(k) and select View Dashboard
Sign in directly at the Gusto Retirement sign-in page.
Once you're in your 401(k) dashboard, follow these steps:
Select Money movement in the main menu.
Select Activity.
Within the active loan banner, select View dashboard.
Select the Make a payment button.
Review the provided information and follow the prompts to select your payment options (via bank account or check).
The timeline for when we'll receive your additional loan payment depends on which payment option you choose:
Bank account payments: Allow approximately 10 business days for the transaction to complete and reflect in your loan balance
Check by mail: Allow a minimum of 15 business days for us to receive and process the payment before you see it reflected in your loan balance
Important: If you're making a payment to avoid having a delinquent loan be deemed distributed, the payment must be received by (not mailed by) the date indicated in the email you received. If there are fewer than 20 business days before the date the loan will be deemed distributed, we recommend making the payment by bank account instead of sending a check.
You can monitor your pending payments and loan activity from your transaction history available under the Money movement > Activity tab in your dashboard.
If you're making a partial repayment on a loan in good standing: Your future payments will not change. You will simply pay off your loan sooner than is shown on your amortization schedule.
If you're making a partial repayment to make up for missed loan payments: Any payments made will be applied to the oldest outstanding payments until the loan is brought current.
If you wish to repay your loan in full and will be receiving a paycheck in the next 2–3 days, wait until those funds have settled for the most up-to-date loan balance amount, and to avoid an overpayment.
It typically takes 5–10 business days for your ACH loan payment to clear from your bank and be applied to your account. Additionally, it can take up to 1 week from when your final payment reflects in your account for your loan to fully close. You will not be able to request a new loan until this timeline has passed.
Note: If there is a scheduled payroll within the time frame for your payment to process and the loan to close, you may incur a loan overpayment.
If you're paying off your current loan to take out a new one: The maximum new loan amount you'll be able to request is $50,000 minus the highest outstanding balance of your prior loan(s) in the last 12 months, or 50% of your vested account balance, whichever is less.
An overpayment occurs when the amount paid exceeds the remaining balance due on the loan. This typically occurs when a payment is made outside of payroll, too close to when a scheduled payroll deduction will also occur.
If an overpayment occurs, contact our participant support team so we can issue a refund. The refund process for an overpayment can take up to 30 days from when you notify us. During this time, you will be unable to request a new loan, as the existing loan cannot be closed until the overpayment is processed.
If your company is moving to or from Gusto Retirement, your existing loan will transfer with the rest of your plan assets. We recommend monitoring your account and payroll to ensure your loan payments continue to be made. If any payments are missed during the transition, you should work with your employer to make up the missed payments through payroll.