Is there a penalty for borrowing on a 401 k?

ScottGem

No. A 401k loan provision has to be written into the plan. But if it is you can borrow under the terms of the provision. Generally plans allow no more than 2 outstanding loans at the same time, usually 1. Interest is charged at a competitve rate to other secured loans. However, the interest you pay goes totally into your account so you are paying yourself interest.