What is a Refund Anticipation Loan?
A refund anticipation loan is basically an instant tax refund. Refund Anticipation Loans (or “RALs”) are what you get when you go to a tax-preparer’s office and they tell you that you can get an “instant tax refund” right then and there or in a day or two. The tax-preparer charges you a fee to fill out your taxes for you and then charges you another fee to give you an instant tax refund. While many people are happy to get their tax refund without waiting, this might not be the smart way to go.
A refund anticipation loan, or RAL, is just that – a loan. Why would you pay a super-high price to borrow money that already belongs to you? That sounds ridiculous, doesn’t it? But that’s pretty much what happens when you get a RAL. You hear and see advertisements for “Fast Cash Refunds,” “Express Money,” or “Instant Refunds.” These ads offer to get you your refund in just a day or two, or even on the spot. Beware!! Many of these “fast refunds” are really LOANS, refund anticipation loans. When you get a RAL, you are borrowing against your own tax refund money. And RALs are often sold to people who need money the most – low and moderate income workers who receive the Earned Income Tax Credit. How Much Do I Pay For a Refund Anticipation Loan? RALs are extremely expensive. Loan fees can be anywhere from $30 to $90, which means you are paying Annual Percentage Rates (APRs) of about 60% to over 700%. And this is just to get your tax refund a few days earlier than you can get it for free fro
