A refund anticipation loan is a temporary loan provided by a lender against an anticipated tax refund. The term is normally two to three weeks, and it is secured by your tax refund. It is a loan designed to give people an advance on their tax refund. The downside of this loan is that the charges could be high, so it might not be worth it to obtain the loan.
Understanding a Refund Anticipation Loan
These loans began in 1985 when an accountant came up with the idea. Sometimes waiting on your refund can seem like forever. This is a way of giving consumers financial relief a little early. After completing your tax return, you can usually have the money in your account in less than 24 hours.
Limits and Amounts
This loan can be approved very quickly, and you will have the money in your bank account soon. You can have a loan for the full amount of your tax refund. The loan will be considered paid when your tax refund arrives. You cannot receive a refund anticipation loan for larger than your refund amount.
The loan issuer has to ask for information from the Internal Revenue Service to see if there are any liens against the refund. Back taxes, student loans, or child support liens could exist against the loan. If this is the case, you may not get the loan.
What Types of Refund Anticipation Loans Are There?
Some of the tax anticipation loan options include:
• Soft refund anticipation loans –This is a debit card that the issuer gives you.
• Bank account refund anticipation loans – These loans are deposited directly into your bank account.
These loans are offered by numerous tax filing companies, including H & R Block, Jackson Hewitt, and Liberty Tax Service. Before issuing the loan, they will take out any fees that you owe.
How to Apply for a Refund Anticipation Loan
You can apply for a refund anticipation loan while you are completing your taxes. The company that is filing for you will lend you your refund minus the cost of your loan. When your tax refund arrives, the refund will go directly to the lender.
Before you agree to a tax anticipation loan, the lender must disclose several pieces of information in writing. These disclosures include:
• Charges and fees associated with filing the return electronically
• Total amount of the charges and fees
• APR rate of the loan
• It needs to state that you are responsible for paying the loan even if the amount is smaller than you believe it will be.
• That you can e-file your tax refund without taking out a loan.
You need to look over the fine print carefully. Ask numerous questions before agreeing to a loan. Make sure you know the interest rate and the other fees that they charge you.
No credit check is conducted for these loans. Your tax refund is the collateral for securing the loan. If you think that you might want a tax anticipation loan, you need to research the companies that offer them. Do your homework to decide if this type of loan is right for you.
You can apply for these loans online and get instant approval. You don’t have to fax any documentation into the company. When applying, you need to state your name, email address, and telephone number. You must also send your address, city, and zip code.
To receive approval, you must be at least 18 years of age, and you must have a valid phone number. You must have a monthly income, and you must have an active checking account that has been opened for at least a month.
After you receive the loan, you need to pay close attention to the due dates. Make sure you pay back the loan on time or you will have problems. You can use your loan for anything that you want.
You can also go into the office of an issuer to complete an application. Also, you will normally get approval for the loan unless there are any liens with the IRS. You do not need to submit pay stubs or W2 forms. When you apply online, you are under no obligation to accept the loan offer.
How Does Repayment Work?
The tax anticipation loan is due as soon as you get your refund. When applying for a loan, your lender will tell you the repayment terms. Normally, on your due date, the lender will automatically withdraw the money from your account. Your refund will come to you, so it is your responsibility to pay the lender.
FAQs We Know You Have
How can I find these loans?
You can search online to see who specializes in these loans.
Do these providers also do my taxes?
Many websites who provide these loans do not complete your taxes. However, many tax providers do offer these loans.
How much can I borrow?
Some lenders allow you to borrow up to the amount of your tax refund. Other lenders set a limit of $1000 or $1500.
When can I expect my loan?
Some companies will deposit the money within an hour. However, it usually takes up to 24 hours.
What happens if I don’t have the money to repay the loan?
If you do not think you are going to be able to pay the lender on the due date, contact the lender before it is due. The lender will probably be able to extend the payment, but an additional fee will be charged.
What if I have a bad credit history?
Your credit history will not prevent you from getting a loan.
How much do these loans cost?
The lender will determine how much the loan will cost. The fees on the loan can range up to $250. Make sure you know the cost before you agree to the loan.
Can you refinance the loan?
States have their own laws about these loans. In some states, you can rollover the loan. Still, you need to be aware of the additional fees that they can add to the loan.
It can take up to 21 days to receive a refund from the Internal Revenue Service. Millions of people wait anxiously for the IRS to send their refund to them in the form of a check or in their bank account. A refund anticipation loan can give you an advance on your tax refund. Before you consider a loan, make sure you research your options to see if a refund loan is beneficial for you.