However, the issue is if the loan is not paid back in time. The unpaid amount will be treated as distributions, and hence, income taxes will apply. If the plan participant is younger than 59 1/2 years old, there is also an early withdrawal penalty of 10%.
A 401k loan is typically due in 5 years and requires at least quarterly payments. However, if you leave the job, the loan will become due in full.
Loans taken from the 401(k) plans are not taxable. However, if the loan is not paid back in a timely fashion through payroll deductions and/or you leave the company and not pay back the loan, the outstanding balance will in fact be taxable. I hope this helps and good luck
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