Borrowing Against Your Tax Refund
Refund Anticipation Loans offer quick access to cash for a price
For Immediate Release: February 24, 2005
ROCKVILLE, Md. - As the Internal Revenue Service urges Americans to file their income tax returns electronically, the preparers of tax returns are urging consumers to forgo the usual wait for tax refunds and obtain Refund Anticipation Loans. Refund Anticipation Loans are marketed by tax preparation services and allow consumers to borrow money against their projected tax refund. But while the loans may let a taxpayer start spending their refund before actually receiving it, the privilege comes at a cost.
"The annualized interest rates on these extremely short-term loans, which average 10 days, can be as high as 700 percent," said Steve Rhode, president of Myvesta, a nonprofit consumer education organization. "There are also administration and other fees involved which, when added to the tax preparation fees, make the loans even more expensive."
According to Rhode, while the main attraction of a Refund Anticipation Loan is getting money fast, they aren't the only option for cashing in your refund quickly.
"Just about all major tax preparers offer electronic filing of your taxes directly with the IRS and you can even file electronically from your home computer. For many people it's free," Rhode said. "When you combine electronic filing with a direct deposit into your bank account, you can generally get your refund in about 7 to 10 days. If you are considering obtaining a refund anticipation loan, check to see if all the costs involved are actually worth getting your refund a few days early. In most cases it's just best to be patient."
If you are among the many Americans who will be owing taxes this year instead of receiving a refund, read the Myvesta publication "How to Deal with the IRS if You Can't Pay Your Taxes." It can be downloaded free online from Myvesta.org.
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MyvestaSM is dedicated to helping people create healthy financial lives. The organization provides a wide range of materials to inspire and inform people so that they can break down their barriers to financial and personal success. For more information visit Myvesta.org online.
