Refund Loans

Refund loans offered by tax preparation services look attractive to many a taxpayer who prefer not to have a check arrive from the federal government. Refund loan carry steep fees which make for a high interest for any rate for taxpayers that expect to receive a large chunk of the money back from the IRS; which the tax service and lender get a big piece of for providing the refund loan.

Two advocacy nonprofit groups that have studied the refund loans – the Consumer Federation of America in Washington, DC, and the National Consumer Law Center in Boston – concluded in a recent report that the application for refund anticipation loans cost 12 million taxpayers an estimated $1 billion in loan fees in year 2004. In my opinion these groups tend to inflate the numbers.
 
They never went into details of how much taxpayers were charged for these loans, but they claim some probably paid close to $400 for the refund loan. The amount included the preparation of a federal tax return also. In my opinion that not so bad considering I recently paid $250 just to have my taxes done by an accountant and I did not even take out a loan of my refund of $2300.
 
Some say the average refund is a few thousand dollars, so if someone paid $400 to get their money now including the tax preparation service compared to in a few weeks, the interest on this loan is high yes, but if you really need it to pay rent or fix your car so you can get to work that is not so bad!

Personally, I think consumers should be the judge of the value of what they spend their money on, and that includes “refund loans“.
 

(highly recommended)