How Tax Refund Loans Work
Are you looking for a tax refund? You can easily get a refund before IRS processes your returns and sends the money. However, you might get into an expensive loan and end up paying services that you do not require. If you are filing taxes electronically or even using direct deposit methods for the refund, you can get your funds within 21 days.
Some years back, tax refund loans were quite expensive. In fact, they were like payday loans. In this case, you get an advance on the tax refund without having to pay interest or fees for the money you have borrowed. It is vital to note that this is not free money. That is because you are paying fees to have the taxes prepared, and the cost of refund advances is added into tax preparation fees that you pay. Tax services can also find ways of earning extra revenue for the preparation fees.
If you fail for tax preparation upfront, the tax services can charge you extra fees. In fact, those that require funds do not have the money to pay for the preparation upfront. Therefore, it is a good source of revenue.
Also, your tax service can provide you with a payment card. In such a case, the card is likely to charge extra fees. You should note that prepaid cards come with monthly fees and other charges. The credit cards charge high-interest rates and the annual fees.
Refund Anticipation Loans
Today’s refund advances are more consumer-friendly as compared to traditional tax refund loans. Therefore, it is vital to understand how these loans work. Ideally, they are financed by small finance companies as opposed to major banks. With these loans, you qualify if you expect money from the IRS. The tax preparer can offer you a prepaid card with the funds loaded onto it, bank deposit, or paper check. After the IRS processes the returns, the refund gets directly into the lender. In this case, the loan is paid off, and you are done with the lender, although you can have funds available for spending.
Costs
The truth is that traditional refund anticipation loans are quite expensive. That is because you are borrowing for a few weeks, but you end up paying interest and fees on loan. When you convert these costs to an annual rate, they are quite high. Ideally, you are paying to have your money quicker than you would otherwise get it.
