Survey: Taxpayers Don't Understand Refund Anticipation Loans

Do you? Refund anticipation loans (RALs) are loans you get based on your expected tax refund. When you file your taxes, the tax preparer might offer to give you your refund money immediately. If so, you're using a refund anticipation loan. Of course, there's a cost. Most people don't know about the loans, or the costs associated with them. A survey conduced by Americans for Fairness in Lending found the following:

• 48% of respondents indicated that they had never heard of RALs. If this percentage comes from AFFIL members, who are more educated about and regularly take action to end predatory lending, it is likely that the general public is even more unaware of these extremely high cost loans
• 61% of respondents did not realize that Annual Percentage Rates on RALs exceed 36%. The truth is that APRs on RALs generally range from 50% to 500%, and with a typical add-on fee of $40, the range climbs to 85% to 1,300%

That's a high priced loan. Find out how refund anticipation loans work. They go by a variety of names (tax refund loans and tax return loans, for example) but they're the same thing.

Further reading:

• APR - Overview and How to Calculate