- 1). Determine if you are eligible for a TSP loan. TSP participants who have not separated from service may take a loan from their TSP. A general purpose loan would be used to pay off credit cards. General purpose loans can have a repayment period of one to five years. You can have only one general purpose loan outstanding at a time. Loan repayment is made through payroll deduction. TSP loans are not taxable; generally a loan is favorable to a withdrawal.
- 2). Apply for a loan to pay off your credit cards online or request a loan application. According to the TSP website, loans are generally processed within several weeks.
- 3). Consider an in-service withdrawal if you are not eligible for a loan. In-service withdrawals are available for TSP participants over age 59 1/2 and those experiencing financial hardship. One TSP definition of financial hardship is that the member is experiencing negative monthly cash flow. If credit card debt is causing negative cash flow then an in-service withdrawal may be a viable option. Financial hardship withdrawals are limited to the amount of your financial need. Apply online or request in-service withdrawal forms from TSP.
- 4). Request a partial redemption to pay off your credit cards if you are separated from service. Those separated from service may not take a loan or make an in-service withdrawal. A partial redemption is allowed if you did not take an in-service redemption while employed.
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