What is a Tax Refund Loan or Refund Anticipation Loan (RAL)?
A Tax Refund Loan or Refund Anticipation Loan (RAL) is a short term loan provided to individuals as a Cash Advance and is based on the individuals anticipated Tax refund.
What should I know about Tax Refund Loans?
- Typically Tax Refund Loans require the completion of the individuals tax return to determine the estimated refund.
- These loans are unsecured loans and have higher interest rates.
- Often the lender will charge additional fees to cover the cost of completing or verifying the tax return.
- The lender in most cases will receive your tax refund into their bank account to ensure they are compensated first.
What are the pros and cons of a Tax Refund Loan?
Pros
Instant access to cash
Loans available to individuals with poor credit history
Cons
Additional Fees
Higher Interest Rate
Alternatives to a Tax Refund Loan
Get more of your money back!
- You should first examine your W4 (Federal Withholding Form) and make adjustments to minimize the amount the government withholds from your income. If you are due a refund larger than $500, you could have that money already without additional fees by adjusting your W4 to reduce the amount withheld from your check.
- Consider filling electronically and using direct deposit to speed your Tax Return with far less fees then a Tax Refund Loan.
- Consider selling unnecessary items, a tighter budget or a family or friend loan to help you retain a much larger share of your tax refund.
Tax Refund Loans provide immediate access to cash but often greatly reduce the amount of your refund.
Cash Titles Staff