Dougsbpc Posted February 25, 2015 Share Posted February 25, 2015 Plan only allows for one outstanding participant loan at a time. It does allow for loans to be refinanced / renegotiated. One of the drawbacks of not allowing concurrent loans is that any participant who refinances can have a shorter repayment period than 5 years. For example, if a participant has been paying 2 years on an existing loan. The new refinanced loan would then be restricted to a 3 year repayment period. What if the participant's first loan was for a home which the document indicates can have a 20 year repayment period? Suppose that even though he could have had a 20 year repayment period, he only chose 10 years. Now if he refinances, what is the new loan repayment period restriction? Or is there a restriction? Thanks Link to comment Share on other sites More sharing options...
Lou S. Posted February 25, 2015 Share Posted February 25, 2015 What is the drawback? I'm of the opinion that Plan Loans should be hard to get and you shouldn't be using them as a piggy bank so the additional restrictions are good in my opinion. That said, I don't believe you can refinance a home purchase loan later on to a term of more than 5 years since the new/refinanced loan is NOT for a home purchase anymore. Though maybe the IRS has some guidance that allows it, if so it is something I missed. And yes the refinanced loan generally get's you stuck with a shorter repayment period to not violate the 5 year repayment period. The other alternative is to pay off the first loan and take a new one with a new 5 year period, though sometimes that is problematic if the $50,000 limit reduced by highest balance in the last 12 month restriction comes in to play. edit:typos Link to comment Share on other sites More sharing options...
Dougsbpc Posted February 25, 2015 Author Share Posted February 25, 2015 Thanks Lou That makes perfect sense. Link to comment Share on other sites More sharing options...
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