Tax Refund Loans

 

Tax Refund Loans & Substitutes

Tax refund loans are the “fastest” way to access your tax refund money – period. Nothing beats tax refund loans for fast access to your pending tax refund dollars. If you can’t wait for your tax refund, then you can choose to find a lender that offers tax refund loans.

These short-term refund anticipation loans use your federal income tax refund as collateral and enable taxpayers to access their refund cash almost immediately.

Within this article I will be discussing the subject of tax refund loans, the process of applying for this kind of loan, and the requirements for this sort of loan. I will cover the benefits of tax refund loans and a I will disclose a few other short-term loan finance options you may want to consider as an alternative solution.

Names of Loans Secured by Tax Refunds

A “tax refund loan” is also known as state and federal instant refund loans, rapid refund, tax refund advances, refund anticipation loans (RAL), and refund anticipation checks. All of these short-term loans serve the same purpose; to offer and provide taxpayers with rapid access to their pending tax refund dollars.

These loan product offerings provide taxpayers with the valuable convenience of obtaining their money almost immediately less the associated fees and interest expenses.

Here is a general overview of the process of applying for and obtaining tax refund loans:

      1. Taxpayer Seeks Out A Commercial / Professional Tax Preparer – Professional tax preparers are one of the best sources for tax refund loans. Some local cash advance services may also offer this type of loan. Generally, most lenders will require the return to be e-filed. Most lenders will require proof of filing and acceptance by the tax authority.
      2. The Filer’s Tax Return Is Prepared – a taxpayers income tax return is prepared and the result will indicate whether or not the filer is entitled to refund. If it is determined the filer has a tax refund coming they will be informed of the availability, terms and conditions for receiving a tax refund loan by the tax preparer.
      3. Subject To Loan Approval – upon completion of all the forms and loan approval is obtained the loan will be secured or collateralized by the pending tax refund. Approval may come directly from the tax preparer, tax service, or from a partner banking or lending institution that works with the tax preparation service.
      4. The Collateralization Document – upon approval the loan applicant will complete a form authorizing the IRS or other tax agency to deposit the borrower’s pending tax refund directly into the lender’s account at some future time when the tax authority has completed it’s internal process and proceeds to issue the taxpayers refund.
      5. Final Approval – upon approval, the borrower will be able to receive the amount of their tax refund, less fees and interest charges. Payments may be received by prepaid debit cards, direct deposit, or by check depending on policies of the preparers and lenders. Often the funds become available within 1 business day, 24 hours, or less.

Tax Refund Advance Fees

When borrowers take-out tax refund loans, the borrower only receives a portion of their refund. Any fees owed to the lender and/or the tax preparer are subtracted from the pending refund amount. The actual dollars handed to borrower is the amount after all fees and interest is subtracted from the full amount of the anticipated tax refund.

Fees and interest charges associated with tax refund loans are considered high given the fact the money is paid back to the lender by a federal or state agency, usually in a relatively short period of time. Filer borrowers should expect to pay tax preparation fees to the tax preparer which are customary for this service; but, they also will pay various administrative fees, loan fees, finance charges, and possibly processing fees.

Benefit of Tax Refund Loans

The biggest advantage of a tax refund loan is the convenience of gaining immediate access to your pending refund dollars.

Alternatives to Tax Refund Loans

The best alternative to a tax refund advance is to eliminate the need, side-step the need, or just don’t borrow the money in the first place. Just wait impatiently for the refund to be received directly from the IRS or other authority.

    Some other options to tax refund loans are:

  • Consider asking family, friends or relatives for a short-term loan.
  • Delay some immediate expenses and temporally cut the household budget to the max.
  • You may want to consider a “payday loan”, also known as a “pay check cash advance” or “payday advance loans”.

All said, rapid tax advance loans have their place providing a valuable and often needed service. It can be the difference between a roof over your head or transportation to a job. So if you find yourself with an urgent need for dollars you just might want to consider tax refund loans.