For the purposes of a qualified plan loan, the reasonable rate of interest that the Department of Labor provides is one consistent with rates charged by commercial lenders. To apply a reasonable rate to your qualified plan loan, a plan administrator will typically survey a few financial institutions to get a general idea of the interest rate on a particular type of loan. For example, assume that the purpose of your loan is to buy a home. Your plan administrator would use a rate that is comparable to the rates used by commercial lending institutions for mortgages.

(For more information on borrowing from qualified plan loans, see Borrowing From Your Plan.)

This question was answered by Denise Appleby
(Contact Denise)

  1. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  2. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  3. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
  4. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  5. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  6. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
Related Articles
  1. Professionals

    Is Delaying Social Security Until 70 a Good Idea?

    Soon to be retirees are often told it's best to wait until age 70 to collect Social Security. Here's why this is not always the best advice.
  2. Professionals

    Top Tips for Maximizing Social Security

    Between delaying filing, claiming strategies and taking advantage of special marital benefits, there are several ways to maximize Social Security.
  3. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  4. Investing Basics

    5 Things To Ask Before Hiring A Financial Advisor

    Choosing a financial advisor isn't an easy task. Here's a list of the most important things to consider when planning for your financial future.
  5. Professionals

    Advisors: Clients Want These Three Things from You

    Calmness, transparency and credentials (and more) are the key elements clients look for when selecting a financial advisor.
  6. Investing Basics

    Hiring a Financial Advisor? Look for the CFP Label

    Don’t skimp on the CFP designation. Here's why those three letters show that someone is qualified in financial and investment planning.
  7. Savings

    The Top Seven 529 Plans for 2015

    With so many choices and so many features (tax advantages, fees, annualized returns) to consider, it's hard to know which 529 plan to choose. Here's help.
  8. Insurance

    Life Insurance & Annuities: Sound Investments?

    There are certain scenarios in which investing in insurance is a savvy move. But expect a big chunk of your money to go toward fees.
  9. Investing News

    Why Saving 10% Isn't Enough To Get You Through Retirement

    Retirement experts and financial planners often tout the 10% rule: in order to have a good retirement, you must save 10% of your income. The truth is unless an individual plans to go abroad after ...
  10. Professionals

    How Retirees Should Prepare for a Rate Hike

    Janet Yellen has indicated that there will likely be a rate hike later this year. Here's how retirees should prepare.
  1. Securities-Based Lending

    The practice of making loans using securities as collateral. ...
  2. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  3. Assistance Agreement

    An agreement between a lending government, financial institution, ...
  4. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  5. BOGO Loan

    A lending scheme in which a financial institution or other lender ...
  6. Deadbeat

    A slang term for a credit card user who pays off his or her balance ...

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!