Are you planning on getting an IRS tax refund soon? Don’t let the excitement get the better of you, and be wary of lenders promoting tax refund loans, because these can be extremely risky.
Before you consider a tax refund loan, be sure to check out alternative fundraising opportunities that are significantly less risky.
Tax refund loans, also called refund anticipation loans, provide borrowers the same amount that they anticipate receiving from their tax refund, but prior to actually receiving any money from the government.
These loans typically have extremely short life-spans, sometimes lasting less than 10 days from borrowing to repayment, with lenders requesting that the loan get repaid in full as soon as your tax refund check from the IRS appears.
Tax refund loans are typically extremely expensive, with interest rates hovering somewhere between 40% and 700%, which is extremely high, even for a short term loan.
And unless you’ve already been turned down from every other alternative fundraising opportunity, that’s probably far more than you should be spending to come up with some quick cash.
Alternatives to Tax Refund Loans
There are a number of ways to get your income tax returns sooner, without paying fees, or facing extreme interest rates. The easiest method is to submit your tax return early, as soon as you get your W-2.
You also have the option of going completely electronic, which dramatically speeds up the process. To get your refund as quickly as possible, you’ll need to abandon the traditional paper return sent via mail and file online instead.
You can get the money almost as fast as you would with a tax refund loan, but avoid the added costs of origination fees, interest and potential penalties. In fact, you may not need to pay for anything at all!
An Internal Revenue Service partnership with tax preparers and software companies offers free online tax preparation and e-filing to some taxpayers, so find out if you’re eligible, then do it if you are.
Via the Free File Fillable Tax Form option, anyone, regardless of income, can enter their tax data using online forms, and then file those forms directly with the IRS for free.
This is not a tax software program, but simply blank forms you can access via the Internet, which can be filed directly over the web, rather than having to be printed out, completed by hand, and mailed in.
The IRS says that those citizens who take advantage of e-filing will their tax refunds much more quickly than they would by doing things the traditional way – mailing in a paper tax return. Most electronic filers can expect their tax checks to show up in their mailboxes in half the amount of time it would take to get a refund from a paper-based return.
Electronic filers who opt to receive their refunds via direct deposit do even better! The IRS says that it’s possible to issue refunds to these types of filers within just 10 to 14 days of receiving their return.
But better yet, even if you choose to file the old-fashioned way (via a paper tax return), choosing the direct deposit option for your refund will still reduce the length of time you have to wait for the refund to be issued.
Car Capital Financial
We are Southern California’s leading title loans company, and we’ve got over 15 years of experience in providing safe, reliable, affordable title loans to people throughout the region.
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