What Is A Tax Refund Loan?
A tax refund loan, also known as a tax refund anticipation loan (RAL), is a loan provided to a borrower by a third-party lender provided the borrower is entitled to a tax refund from the IRS based on their tax return.
Tax refund loans typically range between $200 and $6,000 and depending on the lender may be disbursed between December and February.
To be eligible for a tax refund loan, your taxes must be prepared by the issuer. Preparing your taxes would usually attract a token known as a tax preparation fee. You must also meet the lender’s minimum expected refund amount.
Thankfully, there are a lot of other options you can explore if you do not qualify for one. You may apply for installment, payday, car title, installment, personal, quick, or same-day loans on US Installment Loans.
Am I Eligible for a Tax Refund Loan?
Are you 18 years old and over? If yes, you may be. But that’s not all you need to be eligible for a tax refund loan. Your eligibility also hinges on your tax history with the IRS, and how much debt you owe.
Tax refund lenders also generally need you to provide a government-issued ID at the time of applying, proof of income of at least $800, your contact information, and your social security number. These cut across the board.
There are more lender-specific eligibility requirements like the lender’s minimum expected refund amount and what state you are resident in. TurboTax Intuit, for instance, does not attend to borrowers from Illinois, North Carolina, and Connecticut. You may also need to e-file your taxes through a lender to qualify for their tax refund loans.
Pros and Cons of Tax Refund Loan?
One of the most attractive things about tax refund loans is that you are essentially borrowing your money. Limiting your borrowing capacity to the tax returns from the IRS you are entitled to help you from getting drawn into a vicious cycle of debt. That said, they also have their cons which may make some borrowers rethink them. Here are a few we could fish out;
- Convenience: The hassle-free nature of tax refund loans make them so easy to get. More often than not, borrowers testify to getting their loans approved and deposited on the same day they applied. This sure beats having to wait 21 days until the IRS issues refunds for electronic filers.
- You can get a tax refund loan with bad credit: RAL lenders seldom perform hard checks into their borrowers’ credit history. As such, a bad credit borrower need not worry about his credit score ruining his chance of getting a RAL.
- RALs can be used to settle high-interest loans: If you’ve got high-interest debts you’re struggling to pay off, why not use a RAL to consolidate them? Tax refund loans literally attract no interest and can be paid back immediately after the IRS refunds you.
- It is seasonal: As earlier mentioned, many tax lenders have an early deadline for tax refund loans. A lot of lenders put their deadlines between mid to late February. A borrower who misses this window would have to wait till the next year before tendering another application.
- Your refund isn’t fixed: There have been cases of borrowers receiving less than they anticipated from the IRS. More often than not, people who owe a federal or state debt (say; child support) usually have certain amounts deducted from their refund.
- The loan amount is very limited: A borrower can only take out a tax refund loan within $200 to $6,000.
Where to Get Tax Refund Loans?
To date, there are three licensed RAL lenders. Let’s bring you up to speed on how to go about using them:
Jackson Hewitt offers two advances on tax refund loans. One of them is the early refund advance. Usually, an APR of 35.9% is charged on this loan. Its loan term can also go as high as 71 months, depending on the state you are resident in. The no refund loan, on the other hand, has a 0% APR. The maximum loan amounts for the early refund advance and no fee refund advance loans are $1000 and $3500 respectively.
The early refund advance is available from December through to January of the following year while the no fee refund advance loan is available from January to February of the same year. To qualify for its loan, the corporation requires you have your taxes prepared at one of its offices. Tax preparation costs $59
H&R Block is a tax service corporation sponsored and funded by Metabank. They currently operate over 12,000 retail tax offices in Canada, the U.S., and Australia. With a minimum allocatable tax refund loan amount of $250 and a tax preparation fee starting from $69, every borrower can have their funds transferred to an H&R prepaid card in no time. Also, borrowers can only take out no fee RALs with this service unlike with Jackson Hewitt.
To qualify for a RAL using H&R block, you must have your taxes prepared at one of their offices and also pay their tax preparation fee on time. In most cases, H&R block issues same-day payments to a prepaid card issued by them to their borrower after which you can make a one-time transfer to your bank account.
Applicants to this tax loan scheme, funded by First Century Bank, can get advances between $250 and $4000 at 0% APR. However, to qualify for its loans, you must file your taxes through the service and must be applying outside of Connecticut, Illinois, or North Carolina.
Upon tendering your application, TurboTax advises you to open a checking account to access your loan. Your funds are deposited almost immediately after the IRS accepts your returns. Then, you receive a debit card within 7 to 14 business days for physical withdrawal. While you wait for your card, however, you may use the funds to purchase things online.
Alternatives to a Tax Refund Advance Loan
Missed out on the RAL window? There's still hope. Here are three other loan options you can take out any time of the year:
A personal loan is a long-term installment loan issued by lenders to borrowers to cater to their personal needs. They may be used for just about anything ranging from vacation, to home remodeling and credit consolidation. Over the life of the loan, the borrower is required to repay the loan amount plus interest in regular, monthly payments.
Payday loans are short-term high-interest loans lent to borrowers with financial emergencies between paydays. In most cases, they are repaid over the next paycheck and can range anywhere from $50 to $5,000. These loans may be secured or unsecured. They may also be accessed by bad credit borrowers.
An installment loan is a long-term loan taken out as a lump sum and repaid in small amounts over the life of the loan. These small amounts are known as installments and are calculated as the total cost of the loan divided by the loan term. The most popular installment loans are auto title loans, personal loans, and mortgages.
How Much Do You Want?
Is a tax refund loan worth it?
Let’s look at it this way. Do you need money urgently? Have these money needs come up within the winter months of December to February? If yes, a tax refund is definitely up for consideration. It comes with zero interests and can be processed quickly enough to help you settle any financial emergency you may have.
How much time would it take to get a tax refund loan?
Upon application, most lenders send your tax filings to the IRS for validation. This shouldn't take more than a few hours. So, If things are done right, you should get your loan in your account just hours after your application. Otherwise, a day or two after and you have your cash in your checking account.
I already filed! Can I still get a loan?
Yes, you can. However, most tax refund loan lenders process loans only for borrowers whose faxes they filed. So, if you’ve already filed your taxes at another agency/lender, then we advise you get your RAL there. If you filed yourself, you can easily apply for a refund advance loan via an online tax filing service that offers one.
Can I qualify for a RAL with Bad Credit?
As we mentioned earlier, you’re literally borrowing YOUR money. As long as your tax statements and income records are valid, you can take out a tax refund loan without ever worrying about your credit score.