Tax Refund Loan
Tax refund loans are also known as "instant refund loans," or "refund anticipation loans,” These loans target the lower income group of Americans, but these days’ people from the middle-income brackets have also seemed to fall for this gambit. The way these loans are devised, the borrower ends up paying a huge rate of interest, which can even go up to 200% of the APR. The average loan time for the tax refund loan is ten days. Researches from the Consumer Federation of America and the National Consumer Law Center have shown that few taxpayers have even paid a rate of over 200%.
Tax refund loans surely get the money to the customer quickly, but they cost a bomb in terms of repayment. Although these tax refund loans are a great help in the short term, but can be eventually hazardous to your financial health.
Procedure of tax refund loan
Preparing the tax return - income tax return is prepared for the filer and the amount of return is decided after calculation.
Loan is offered to the filer – Lenders offer loans over the Internet, through the taxpayer after being informed about the terms and conditions of the loan.
Approval of the loan – After the completion of forms, the loan is secured with the help of the financial institution that works with the tax preparer.
Receiving Money – Once the loan is approved, the borrower can get their refund amount (less fees and interest charges) "on the spot" after deducting the fees and interest charges. Payment may be sent via a check, prepaid debit cards or through
Risks associated with the tax refund loans
Technically these loans are referred to as refund anticipation loans. It involves a fixed fees and a high rate of interest and most tax refund loans are relatively for small amounts. A high cost to obtain a smaller amount of refunds makes it relatively expensive loan. Generally, the fees and interest terms are not clear and the buyer often ends with incurring hidden costs, which are automatically deducted from the amount of the loan.
Alternatives that can be considered before obtaining a Tax refund Loan.
Unless you are facing a severe financial crunch, it is advisable to stay off the tax refund loans. If the need to borrow money gets eliminated you can be saved a lot of trouble and costs. Or else try filing the return electronically so that you can expect an early return within three weeks. If nothing works one can settle for credit cards as they have a lesser rate of interest than the best refund anticipation loan.
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