In the fast food society that wants everything yesterday, there’s a mystical appeal to products that give consumers something right then and there. The instant loans offered during tax season are no exception. Although these instant refund anticipation loans provide fast cash, they may not be the best alternative in your situation, regardless of the sales pitch.
Facts About Instant Loans
If you listen to the radio or watch television around the income tax filing deadline, you’ve heard the promise of walking into a tax preparer’s office and walking out with a check in hand. While instant loans might appear too good to be true, they’re 100 percent legitimate. They also carry a hefty fee for the convenience.
Without going into detailed specifics that vary by company, the gist is you’re borrowing against your own money. When the company prepares your income tax return and determines you have a refund coming, you get this instant cash option. Rather than waiting for the government to send you your full refund amount, the company offers you an amount less than your refund. In exchange for walking away with your money, you agree to let the government send the company your full refund, thus repaying your loan in full, including the fees. That’s why this instant loan is called a refund anticipation loan.
Alternatives to Instant Loans
If the idea of paying an effective interest rate in excess of 200 percent for the privilege of using your own money doesn’t appeal to you, there are alternatives to instant loans. Keep in mind that while you will not receive immediate benefit of the funds, you will enjoy the full amount due to you. In this case, patience is not just a virtue; it’s a money saver as well.
Take advantage of timesaving options available during tax season. You may be the kind of person who enjoys putting pen to paper when figuring your taxes, but mailing your return to the IRS takes extra time. Tax preparation software programs often come with a free eFile option. If using forms from the IRS website, you can often eFile without fee through the same site.
Use the direct deposit option. Again, waiting for a check to arrive in the mail is time-consuming. The IRS deposits refunds into accounts on Friday of each week after processing. As long as you beat the rush and file early, you can have your full refund within as little as two weeks. When it comes to the IRS, two weeks may as well be instant.
When you find yourself in a financial bind, instant loans from the tax preparer may be a better option than waiting the two weeks. Carefully weigh the advantages against the disadvantages to determine what’s right for you.
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