When it was revealed that refund anticipation loans provided by banks and other financial institutions violated the lending regulations, a lot of lenders and tax preparation companies have come up with ways of obtaining short-term loans. The media discourages people from seeking these types of loans because of their high interest rates and fees. With direct deposit and electronic filing, you might wait for about a month to get your refund from IRS. Also, there are creative alternatives that do not need you to pay the excess fees.
Refund Anticipation Loans
Ideally, most tax preparers offer refund anticipation loans. In this case, the preparer partners with the bank to lend the taxpayer a given amount of money based on the calculated refund. When you receive the refund, it pays off the loan, and the balance is disbursed to the taxpayer. You should note that the government is committed to stopping this practice.
Nowadays, you can find payday loans that are marketed as tax refund loans. Most lenders and lending brokers provide loans that are known as income tax advance, installment loan, tax refund advance, and tax anticipation loan. Although they claim to be tied to the income tax refund, they are ideally short-term payday loans that have a high interest rate. Also, you qualify for the loan based on your income and not the tax refund. Moreover, you must authorize the lender to automatically deduct the amount of the loan payment when the paycheck is deposited into your bank account.
Selling Your Refund
Many lenders can purchase your refund for a fee. For instance, if you expect a refund of $800, you can get a refund of $650. If you are expecting a refund of $2,000 to $2,200, you might get $1,850. Remember that the equivalent interest rate you pay to sell the refund is based on the estimated interest rate for 21 days after you get a refund from IRS.
Instead of paying high interest rates for loans of your anticipated tax refund, you can try other alternatives. For instance, if you file electronically and use direct deposit, you may get your refund within a month. Also, if you are planning to use the money in a store, you should consider using a credit card to purchase the appliance and get a refund. It does not matter whether you are required to make a one interest payment.…