Question: Is there any way I can extend the solo 401k loan payback period out more than 5 yrs? What happens if I don’t stick to the payment plan exactly?
Larry S. in Florida
ANSWER: No. Once the solo 401k loan has been processed pursuant to the terms elected at the time of the solo 401k loan (e.g., interest rate, payment schedule and loan term), the solo 401k loan may not be extended. Note that the solo 401k loan can be initiated at a 15 year pay-back period if the proceeds will be used towards the purchase of your primary residence. The payback periods is 5 years if the funds are used for any purpose other than the purchase of your primary dwelling. However, the solo 401k loan may be paid back early without incurring prepayment penalties.
Lastly, if you don’t make the scheduled payments, the remaining outstanding solo 401k loan balance goes into default and will be subject to taxes.