What happens if you have a 401k loan and lose your job?

I heard that if you already are paying on a loan from your 401(k) account and lose your job amid the coronavirus pandemic, that borrowed money could generate some problems. Does anyone know what happens if you have a 401(k) loan and lose your job?

Even if you lose your job after you take out a 401k loan, you are still expected to pay back the amount within the term. If you are not able to pay back the amount, the IRS will turn your loan into a distribution, which basically means that your loan now counts as income that is taxable. Furthermore, you’ll also be charged a withdrawal fee.

You usually have to repay your loan by Tax Day the year after you lost your job. If you luckily find another job that also offers a 401k loan, you can transfer you old loan to the new loan and continue making your normal payments.