Self-Directed Solo 401k Loan Facts

 

Unlike a that does not allow the participant to borrow from his or her self-directed IRA, the Solo 401k regulations permit the Solo 401k owner to borrow from his or her .  As a matter of fact, both self-directed Solo 401k owners/participants can each borrow from their respective plan funds.  

Self-Directed Solo 401k Participant Loan Facts

Each self-directed Solo 401k trustee/participant can borrow from self-directed Solo 401k for any reason.

The self-directed Solo 401k loan period is 5 years for general loans, defined as loans where the proceeds will not be used towards the purchase of primary home residence. 

The Solo 401k loan term is extended from 5 years to 15 years provided borrowed proceeds are used for the purchase of principal residence.

Self-Directed Solo 401k loan payments are processed either monthly or quarterly.

The interest rate for self-directed Solo 401k loan is either: prime rate plus 1 percent or certificate deposit rate plus 2 percent. 

Self-Directed Solo 401k loan payments are fixed made up of interest and principal.

Self-Directed Solo 401k loan rules do not permit payment of only interest or principal.

Self-Directed Solo 401k loan early payoff allowed without penalties.

The minimum Solo 401k loan amount is $1,000.

The maximum self-directed Solo 401k loan threshold is 50% of account balance not to exceed $50K.

 

      illustration 1: Self-Directed Solo 401k balance is $60K; 50% of $50K = $30K (the self-directed Solo 401k maximum loan amount)

     

           illustration 2: Self-Directed Solo 401k balance is $200K; 50% of $200K = $100K; however, the maximum permitted self-directed Solo 401k loan amount is $50K.

To

 To qualify as a compliant self-directed , the loan must be in writing and documented as follows:

·               Solo 401k Loan Agreement

 

·               Solo 401k Loan Application

 

·               Solo 401k Loan Payment Amortization Schedule

To learn more about the Solo 401k plan rules, including how to invest in real estate, visit: 

http://www.mysolo401k.net or call

800-489-7571