A hardship is a withdrawal, not a loan. Yes you can apply for a hardship withdrawal, as long as the reason you're withdrawing meets the hardship definition. You'll still need to pay the 10% early withdrawal penalty and applicable federal and state income taxes on it. So if you need $1000 in funds, plan on withdrawing enough to cover that amount and the taxes you'll be liable for, they'll withhold 20%, but that may not be sufficient, depending on your total income for the year. You do not want to end up owing the IRS, their interest rates and penalties can be pretty stiff if you can't pay taxes owed when you file.

Good luck.

A couple of additional points to IMHO's answer: not all 401(k) plans allow hardship loans, and the plan determines what qualifies as a hardship. If you do take a withdrawal, the money will be subject to federal income tax, plus a 10% penalty, plus your state's income tax (if you have one). The money they withhold from the withdrawal is just a payment towards taxes that you will owe; it doesn't mean you've paid all the taxes. I strongly suggest you consult with a tax professional before taking a withdrawal so you can make an informed decision.

Incidentally, if you were to stop making payments on your 401(k) loan, the defaulted loan would be considered a distribution and would be subject to tax and penalty in the same fashion.

Good luck.