Advance On Income Tax Refund—Are Refund Anticipation Loans Worth The Trouble?

Around tax time many people start to look for an advance on their income tax refund through a refund anticipation loan. This type of loan lends you money, up to a certain amount in relation to the amount of income tax refund you are expected to receive, and ideally you are able to easily pay back the money when your income tax refund comes. However, there are downsides to this seemingly easy access to money of which you should be aware.

Some reputable companies do offer refund anticipation loans and they can be reasonable. On the other hand, most places that will lend you the advance on your income tax are going to charge excessive fees, high interest, or even a combination of both.

The high interest rates charged on some refund anticipation loans have been in excess of 100% or much higher, which is going to cost much more than if you waited on your tax refund. Ideally, if you were just given an advance on your anticipated refund and then paid back the loan when the money came in, plus a bit to the lender, a refund anticipation loan may be well worth the trouble.

However, since most lenders of refund anticipation loans are looking to make a hefty sum on the transaction, it will rarely be in your favor to take a refund anticipation loan.

If you are in dire need of your tax refund and want to get an advance, then do a lot of research before you settle on a lender. Companies like H&R Block often offer a cash advance on income tax refunds, but again, if you are looking for an refund anticipation loan find out what it will cost you, because you may end up owing more than you get back from your income taxes.