401K 2nd Loan

I have a quick question. I wanted to pay off my 401K loan with an outstanding balance of $7,500, today 4/8/18.  I called my my benefits retirement plan on Friday, 4/6/18, and told me that my highest balance within the 12 month period from today is about $14,000? I get confused a little bit.

If I wanted to borrow, after I paid off my outstanding loan of $7,500, what is the maximum amount I can borrow? I have $110,000 vested balance including this $7,500?

Is it $50,000 less the highest loan balance of $14,000 in a 12 month period?, even though I will fully paid the $7,500? which is $36,000? or $50,000? or $42,500? (ASSUMING this $7,500 is fully paid)

Can someone please help me figure out? Because the plan administrator whom I talked to can't explain it fully to me.

I appreciate any help, please.

Thanks,

Mareil

You may borrow $36,000; regardless of whether or not you pay off the old loan.  Should you take the 2nd loan without paying off the old loan, then your new balance will be $43,500 for both loans.  Should you pay off the old loan and then take a new loan, then your balance will be $36,000.  

So, you may borrow $36,000 (since
1) that $50,000 minus the highest outstanding loan balance during the past 12 months,
AND
2) that amount, when added to the current balance will not exceed $50,000.  

Now: If your plan allows for more than one loan to be outstanding at the same time, then you may take a new loan of $36,000.  If your plan only allows for one loan to be outstanding, then you may pay the current loan off and then take your $36,000 loan.

Good Luck!

If you want an excel derivation of exactly what ETA said, try this:

http://docs.wixstatic.com/ugd/fa3ca5_ec07f19859c940098c4be9cbdf18f0dd.xls?dn=Loan Maximum Calculator.xls

You will have to enter the information that is specific to you.

Not sure if it will help or hurt but here is the IRS' take on this issue.  See question 7

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans#7

The one thing the IRS leaves off the end of their example is when they say the person can take $23,000 they leave the math implied that this person just spend $18,000 to pay the old loan off.  So the next cash to the person was only $5,000. 

Also, some plans restrict the sources available for loans, which could make the maximum loan calculation different.  For example, if your total account balance is $110,0000 but the plan does not allow you to borrow from profit sharing, your net balance is $90,000 available for loans.  

I'm not saying this is the case here, but it is something to keep in mind and ask about.

Thank you to all your response. They are very helpful. The excel spreadsheet showed me exactly how you guys arrived at the amount of $36,000.

Thanks again. Hope the best for you.

Take care. So nice you guys helping someone like me who has no idea with this.

So long...