How to Stop Paying 401(k) Loan Payments

Many workers contribute money to their 401(k) plans as they prepare for their retirement. Sometimes these workers find themselves in a financial crisis. They need money to finance a vehicle purchase or to pay for a home repair. When these workers lack the funds to pay for these expenses, they might borrow the money against their 401(k). 401(k) loans offer these employees the chance to borrow from themselves at a reduced interest rate. The employer deducts the loan payments from the employee’s paycheck. If the employee wants to stop making these payments, she needs to pay it off. This requires several steps.

Review the loan balance. Before you consider paying off the loan, you need to know how much you owe. Many 401(k) providers maintain a website where participants can access their account information. Log into your provider’s website. Review your account information. Detailed information regarding your loan should appear on this site, including current balance and the term of the loan.

Acquire money. Once you know how much you owe, you need to obtain the funds to pay off the balance. Save some money out of each paycheck. If you receive an income-tax refund, a bonus paycheck or an inheritance, include this money with your savings.

Obtain a payoff amount. Once you’ve acquired enough money to pay the balance, you need to find out the exact payoff amount. The payoff amount varies from the account balance because interest charges continue accruing until the provider receives the final payment. Call the provider. Tell them you want to pay off your loan and that you need a payoff amount. The representative should give you this number.

Send in the payoff amount. Go to the bank and withdraw the amount needed to pay off your 401(k) loan. Ask the bank teller to give you a cashier’s check for the total. Mail the cashier’s check to the provider using certified mail.

Confirm receipt of payment. After you receive confirmation that the check was delivered to the provider, log into the company’s website. Review your loan balance to ensure that your payment was applied to your account.


  • If you stop working at your company before you pay off your 401(k) loan, the remaining amount will be considered an early withdrawal, which you do not need to repay. However, you will owe income taxes and a 10 percent penalty on the loan amount that remains unpaid.