That’s a pretty valid question. Tax season is just around the corner and for many of us, the season spells getting a tax R-E-F-U-N-D. We can make no bones about it, on many numerous occasions, taxpayers bank on these funds to uplift their savings.
Sometimes, they plow their refunded money in investments with the help of financial advisors. So for many, this is also a season of waiting. However, some people are not blessed with such longer waiting time.. Bills mounting up, emergency expenses —the reasons are endless. In these cases, it’s best to consider getting a tax refund loan.
It basically works like a short-term loan, with the loan total depending on your expected tax refund. Sometimes refund advances are good options as well. Another term for a tax refund loan is Refund Anticipation Loan or the RAL.
Lenders are mostly small-scale financial agencies that can lend you a loan based on your tax refund. Tax refund loans usually last for about three weeks or so, just enough time for the IRS to go about your tax refund procedure. Hence, it’s a short-term loan. The IRS typically issues refunds between three to eight weeks.
Usually, the loan you receive from the lenders may be transferred to your bank account, be given out as a check, or deposited to your prepaid card. There could be other options but the ones previously mentioned are the most common ones.
As soon as the procedure for your tax refund is done, it will be sent straight to your lending agency. You can heave a sigh of relief and say your troubles are over. However, if your tax refund loan is higher than your tax refund, then you obviously need to pay for the remaining balance.
Some tax filing offices may offer you a tax refund loan right after filing your taxes. You also need to find out which financial agencies are of good repute and trustworthy and which lenders are highly regarded.
Bear in mind, however, that the IRS cannot provide tax refunds as soon as you expect them. You will be forced to wait longer than usual. Also, if you are looking for a loan that lasts longer, perhaps getting a tax refund loan is not a good idea.
It may also not be a good option for you if you foresee that you are not capable of paying the loan completely or in other cases, your refund might not be enough to pay your loan back in full. In this case, the tax refund loan may not be a good choice for you.
Having said that, here are some alternatives or options you may want to take in lieu of a tax refund loan. Tax refund loans usually have high costs so you may want to consider other options. First of all, you can check out if it’s possible for you to lower your tax refund.
There’s a possibility that you are paying more than your required taxes the entire year and you’re getting a bigger tax refund. If that happens, you could opt to have those extra funds moved to your bank account to help you keep away from running short on cash.
This needs more forethought and organization but this will help you bump up your salary.
Another option is to find a free refund in advance. As previously mentioned, some tax filing services offer tax refund loans. More often, they are one of the highest lenders for such loans. They have refund advances and offer this as a way to attract borrowers.
Sometimes, refunding advance loans become free or come at a very low price. You might want to consider filing with TurboTax — found online or H&R Block.
Of course, you have the option to wait. Sometimes delayed gratification is the best answer. If you file for your tax return, the IRS may return it in about a week or two.
Waiting for a couple of weeks is better than shelling out a hundred dollars more. It’s probably not worth it for a short term loan. Check out the tax refund schedule to more or less know your waiting time.
You might also be wondering if there are risks involved in a tax refund loan. The chief issue here is the cost. Ensure that you all the proper understanding of all the expenses connected with a tax refund loan. Check out if you need to pay fines if your refund doesn’t come in a period of time.
This is important because you don’t want to pay for your interests. Another risk you should consider is getting a lesser refund than you anticipated. This issue can never be overemphasized enough as you don’t want to work about finding money to pay the full loan.
Make sure you also take into account the interest and other extra fees. Lastly, there’s a possibility that the procedure in processing your refund with the IRS will take longer than expected —especially during the tax pick season.
Finally, after considering all things, make sure that you are qualified for a tax refund loan.
You also need to check your IRS tax history, provide the lending agency with your pertinent contact information, the total refund you received the year before, and your social security number.
Although your credit score is not that important in this case, considering it doesn’t hold as much risk as unsecured loans, your credit history is still important.
But all things considered, your eligibility to get a tax refund loan is dependent to a large degree on the total amount of refunded money you will receive from the government.
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