Income Tax Refund Loans
So you have filed your taxes, are waiting for your return but really could use some money right now! If you simply cannot wait for the refund to come in the mail, then there is a way to get that money. You can take out a loan against your tax refund.
Tax refund loans are available through tax preparation companies. These used to be called instant or refund anticipation loans. If you have filed your taxes with a professional company, like H&R Block for example, you might have noticed them offering this. Here is the catch; to get a tax refund loan from a specific tax preparer then you must have filed your taxes with them. Keep this in mind for the upcoming tax season.
If you take them up on this type of loan, then they will process a loan for you in the amount refund you are scheduled to receive from the government. You can get this refund loan in approximately one to two days.
Now the loan itself is not coming from the tax preparation company. The company has worked out a loan from a third party institution. So the lender is a bank, not the tax preparation company itself. The banks are usually from out-of-state and are federally chartered. All that means is that because they are not in your state, they do not have to follow your state's laws. (So they are able to charge what they want). And if you need that loan badly enough, then odds are you will be willing to pay.
Now the loan itself is not coming from the tax preparation company. The company has worked out a loan from a third party institution. So the lender is a bank, not the tax preparation company itself. The banks are usually from out-of-state and are federally chartered. All that means is that because they are not in your state, they do not have to follow your state's laws. (So they are able to charge what they want). And if you need that loan badly enough, then odds are you will be willing to pay.
There is a positive and negative when it comes to taking out a loan on your tax refund. This can be a pretty expensive loan, but obvious money maker for the tax preparation companies and lenders. They can take anywhere from 200-2000% since it is calculated as an APR.
Once you sign up for a tax refund loan you will pay a sign up fee. That can be anywhere from $30-$90, and also a financing fee. Not to forget that you are paying the preparation company to file your taxes, so you need to plan on paying that fee as well. The tax preparation company will make about half of the fees here, so it is in their best interest to at least offer the loan to you. Definitely think about how much the loan will cost you overall before you make your decision.
There has been some criticism against tax refund loans. It is viewed as people who have low incomes and are looking for their check immediately. That is a lot of money to take away from your refund and turn over to the preparation company and lender. Yet, if it beneficial to Americans then they wouldn't still be offered. It comes down to how any loan works, people need the money and lenders provide it. The extra money paid in fees is justified by the availability you are getting on having the loan.
If a tax refund loan is something you have been considering, just think about how quickly you need the money. By filing online you are now able to get your refund within a few weeks, so take that into consideration. The loan would just cut that time down of course.
There has been some criticism against tax refund loans. It is viewed as people who have low incomes and are looking for their check immediately. That is a lot of money to take away from your refund and turn over to the preparation company and lender. Yet, if it beneficial to Americans then they wouldn't still be offered. It comes down to how any loan works, people need the money and lenders provide it. The extra money paid in fees is justified by the availability you are getting on having the loan.
If a tax refund loan is something you have been considering, just think about how quickly you need the money. By filing online you are now able to get your refund within a few weeks, so take that into consideration. The loan would just cut that time down of course.
Of course you will save yourself some money by waiting those extra weeks, but for some that is extra weeks you need money for food or to pay bills. If you are unable to borrow money or file online and you really need the money, then take out the loan. Just consider what it will cost you overall to apply for a tax refund loan and make sure it is worth it in the end for you.
