Definition: A refund anticipation loan is like an advance on your tax refund. Instead of waiting for your refund from Uncle Sam, you get a refund anticipation loan so you can spend the money sooner. However, some problems arise when you use refund anticipation loans.
Your lender knows that the loan will be repaid because they know about your refund. Therefore it's a low risk loan -- but you pay as if you were betting the farm. You generally pay a processing fee as well as interest on the loan. Because these fees add up to a large amount relative to your loan, refund anticipation loans are often viewed in the same light as payday loans.
With direct deposit and e-filing, you hardly need to use a refund anticipation loan. Your refund is deposited fairly quickly, and you're better off for avoiding refund anticipation loan fees. If you absolutely have to borrow immediately, look into the alternatives. The tax preparer does your taxes -- they're not the best place to get a loan.- See How Peer to Peer Lending Works
- Investigate unsecured loans at your bank or credit union
Also Known As: Tax Refund Loans, Tax Return Loans
