Pros and Cons of a Tax Refund Loan
If you’re in need of some fast cash to cover an expense or meet a financial goal, a tax refund loan can give you immediate relief with temporary funds as you wait to receive your tax refund. And if you want to explore other loan options, Advance America offers alternatives to a tax refund loan. Here’s a closer look at what tax refund loans are, as well as their pros and cons.
What is a Tax Refund Loan?
A tax refund is money you receive if you pay more in taxes than you owe to the state and the federal government. With an advance tax refund loan, you can collect your refund before it’s processed and sent to you.
A tax refund loan is a secured loan and is guaranteed by collateral, which is your expected tax refund. If you don’t repay the loan, the lender can legally take your tax refund.
How Do Tax Refund Advance Loans Work?
If you’re eligible for a tax refund advance loan, the lender, which is usually a tax-preparation service partnered with a bank, will deposit the funds into your bank account or load them onto a prepaid debit card. The amount you’ll receive will be based on factors such as the lender you choose and your expected refund amount for that year.
Once the government finally sends your tax refund, it’ll go to the lender who issued the loan. The lender will deduct the loan amount and any fees they may charge, and you will then receive any tax refund money that remains.
Pros of Tax Refund Loans
Just like other loans, tax refund advance loans come with a variety of advantages, including:
Receive Your Funds Quickly
If you apply and get approved for a tax refund loan, you may receive the funds right away. You won’t have to wait the 21 days that the IRS typically takes to issue refunds for electronic filers.
You May be able Qualify with less than Perfect Credit
You can take out a tax refund loan even if you have bad credit. Many lenders who offer tax cash advance loans don't perform credit checks. As long as you’ve overpaid on your taxes and the government owes you a refund, you can take advantage of this loan. If you’re having trouble qualifying for other loans, a tax refund advance is an option that can quickly help meet your financial needs.
Pay Off High-Interest Debt
With a lump sum of cash from a tax refund advance loan, you can pay off your high-interest debt. This strategy may save you thousands of dollars in interest charges and late fees.
Cons of Tax Refund Loans
If you opt for a tax cash advance online, you should be mindful of these drawbacks:
Interest Rates and Fees
A tax refund loan is not free, and you may be responsible for interest and administrative fees. The lender might also require that you hire them to prepare your taxes.
Early Tax Season Deadlines
Tax refund advance loans aren’t available at all times. Many lenders have an early deadline for these loans, usually in mid to late February, before you may want to prepare and file your taxes. The pop up tax services business that typically offer these loans may not be open all-year round for future questions or services.
May Receive Less Money Than Anticipated
Since a tax refund advance loan is based on how much you think you’ll get back in a refund, you may receive less money than you anticipate. If you owe federal or state debt or child support, for example, your loan amount will be reduced.
Receive Money Fast with Advance America Loans
If you’re waiting to receive your tax refund and need some money quickly, Advance America has several tax refund loan alternatives that you can access all year long. From payday loans that can get you cash before your next paycheck to a line of credit that you can access whenever you need it, our loans can help you cover your expenses without the hassle.
Once you fill out a quick application online or in the store, you could get approved for a loan in minutes and receive your money that same day. Learn more about the loans we offer to find the right fit for your financial situation.