When tax time comes around every year when a person is expecting a refund from the government instead of owing the government money they want their money quick. This is where a rapid tax loan comes up. The question also arises if whether or not the refund loan is a good idea.
Refund Anticipation Loans
There are many times when a tax payer can not wait for their tax refund to be direct deposited into the bank account or to wait to receive a refund check in the mail. This is where the refund anticipation loan can come into play. This is a loan that will allow you to figure out what the refund amount is before the actual refund is due. This amount is then given in the form of a loan to be paid back when your actual refund arrives. The catch here is that this type of loan comes with a very high fee.
Do Not Get Stuck In The Loan Trap
When a person is in need of some quick cash they might have thought about checking into personal loans with bad credit but then the tax preparer offers them the opportunity to obtain a rapid tax loan. This type of loan can often get the borrower into more financial trouble than before. There are several reasons why this can be more problems than before.
There are fees that are charged by the tax preparer for processing a rapid tax return loan. These fees are usually around one hundred dollars but can also get even higher. It depends on the amount of the loan. This is a fee that is being paid for the convenience of receiving the money early. It is almost like an interest payment. If this were looked at on an annual basis the interest rate would be equal to almost seven hundred percent. That is extremely high to borrow money.
It is also important to remember that these loans are given to tax payers before the Internal Revenue Service accepts their tax returns. What this means for the borrower is that if the return is not accepted and no refund is given that the loan will still need to be paid back. If the borrower is not able to pay the loan back right away it could be detrimental to their credit report.
A rapid tax refund loan is only beneficial to the lender. These loans are not a good idea for the person who needs to borrow the money. This is because they are making money on the fees that they are charging when distributing the loan. You should keep in mind that the money that you are borrowing is actually your own money. You are paying money to borrow money from yourself. If it is necessary that the money be being borrowed from the tax return it should be paid back immediately when the actual tax refund is received. This will keep the borrower from getting a bad mark on their credit report.