Self-Directed Solo 401(k) Loan Rules and Regulations - Part 1
Updated: Nov 17, 2021
Assuming the self-directed solo 401(k) plan contains loan provisions that allow for participant loans, as Nashional Self-Directed’s plan document does, as trustee you are allowed to borrow from your solo 401(k). (Part 2 can be found here.)

What is the interest rate that must be charged on the solo 401(k) loans?
Rates considered reasonable by the DOL for loans secured by a participant’s solo 401(k) account balance range from:
A certificate deposit rate plus 2 percent
To the prime rate plus 1 percent.
The DOL regulations require that the reasonable rate of interest standard must be reviewed at each time a loan is originated, renewed, renegotiated, or modified. As such, a solo 401(k) plan sponsor cannot simply choose a loan rate at the time the plan is setup and use that rate continuously. Loan rates must be reviewed and updated as often as needed to be in line with the current CD or Prime rate.
How is my participant loan secured?
It is secured by up to 50 percent of the present value of a participant’s account balance. This is determined at the time the solo 401(k) loan is made.
If a solo 401(k) participant borrows one half of his or her account balance and then takes a solo 401(k) hardship distribution before the loan is repaid, he or she will still be in compliance with this rule.
Does the creditworthiness of the solo 401(k) borrower need to be reviewed?
No, the DOL does not require anyone to review financial statements or other indications of creditworthiness in order for the solo 401(k) participant to take out a loan.
Are there any restrictions on how a solo 401(k) loan can be used?
No, there are not. As long as the employer does no