When did this limit get put in place?
The Internet is really good for finding current information, but it takes a bit of sleuthing to find historical information. I haven't found anything to indicate whether the loan limit has been a part of the 401(k) system since its inception in 1978, but I can't find anything that documents a lower limit, as would likely be the case if it started out lower and has been gradually increased.
I have found two articles that indicate that the limit was $50,000 as far back as 2014.
From https://www.marketwatch.com/story/avoid-the-temptation-of-dipping-into-your-401k-2015-06-04 (Published: June 29, 2015):
The Internal Revenue Service generally limits a participant’s plan
loans to a total of $50,000 or half of the participant’s vested
balance, whichever is smaller.
From https://pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2015/09/WP2014-01-Lu-OSM-Utkus-Young-2.12.20144.pdf (February 2014):
...the participant may only borrow up to half of his account balance with a
maximum loan of $50,000
That Lu/Mitchell/Utkus/Young paper refers to a number of earlier papers, some of which might have data on the limits in place before 2014.
Aha! From a 1997 report from the US General Accounting Office:
Borrowing from 401(k) pension plans is legally permissible and allows
plan participants to borrow the lesser of $50,000 or one half of their vested
account balance.
Trying to follow references from the GAO report even farther back is getting challenging. So we can say that it has been in place since at least 1997.
Kazoni points out in a comment that the $50,000 loan limit is found under IRC 72(p) which was added with Section 236 of the Tax Equity and Fiscal Responsibility Act of 1982. So now we can say since at least 1982.
Is there a way around it?
The CARES Act (aka Coronavirus relief/stimulus) increased the limit to $100,000 in certain cases.
From https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers:
The CARES Act also permits employers to increase the maximum loan amount available to qualified individuals. For plan loans made to a qualified individual from March 27, 2020, to September 22, 2020, the limit may be increased up to the lesser of: (1) $100,000 (minus outstanding plan loans of the individual), or (2) the individual's vested benefit under the plan.
Note that this expansion ended on 22 September 2020, and the IRS page hasn't been updated to indicate an extension. And that assumes you qualify, which is probably a whole question unto itself. (The list of qualifications is unclear as to which criteria are "And" and which are "Or".)
Additionally, employers and/or plan providers can implement stricter limits than the $50,000 loan limit.
For ways around the limit that don't involve a loan from your 401(k), Pete B.'s answer gives some good alternatives.
So let's answer this part with: other than a potential increase under CARES, there are no ways around it within the 401(k) system.
As for the "seems to be ridiculous since it is my money" part, keep in mind that the whole point of the program was to encourage saving money for retirement by creating tax advantages. Yes, it is your money, but it is entirely reasonable to have limitations on what you can do with the money in exchange for the tax advantages.
