Rapid Refund Personal Loans Aren't the Best Deal

[Mar 30, 2009.]

 

Waiting for a tax refund can seem painful when someone really needs their money. That’s why many people turn to rapid refund personal loans to tide them over until they receive their tax refund from the government. But these fast cash personal loans aren’t really the best way to get a refund. Here’s why.

About 9 million U.S. taxpayers received rapid refunds (also known as Refund Anticipation Loans) during the 2006 tax season, according to MSNBC. Because so many people are struggling to pay their bills in this tough economy, even more folks may decide to get this type of personal loan this year.

But rapid refunds are just like other personal loans and come with fees and high interest rates. The annual percentage rate on this type of fast cash personal loan typically ranges from 36% to 150%—and sometimes higher.

Although rapid refund loans are touted as a way to get instant cash, most people would be better off filing electronically and having the money direct deposited in their bank account. When tax returns are filed electronically, most people receive their refund within 10 to 12 days.                                                                    

People should also keep in mind that even if they apply for and receive a rapid refund, it's not guaranteed that they will get a refund from the Internal Revenue Service (IRS). The IRS has nothing to do with rapid refund loans offered by tax preparation services. So if a person’s return was prepared improperly and they end up owing taxes, they’ll also be liable for paying back the rapid refund personal loan and all the fees and interest associated with it.

Taxpayers should use caution when choosing a tax preparation service. Just because the storefront on the corner seems to do a brisk business doesn’t mean the people working there are particularly knowledgeable about tax law.

People who don’t have a complicated return may even make out better using a free online tax filing program. The government has information on options for e-filing.

Taxpayers can also get free help filing their tax return through the Volunteer Income Tax Assistance (VITA) program. This government program has tax preparation sites throughout the U.S. with volunteers trained to help low- and moderate-income taxpayers.

It’s best to resist the temptation of fast cash tax refund offers to avoid any problems. Not only will taxpayers avoid opening themselves up to potential scams, but they’ll keep more of their hard-earned money in their pockets.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.