Bankruptcy

Refund Anticipation Loans - A Bad Idea

By Jonathan

My Bankruptcy Law Network colleague Brett Weiss wrote a timely article on the Debt Law Network blog about a type of loan that is almost always a bad idea.  Pioneered by the national tax return filing service chains, tax refund anticipation loans are short term loans collateralized by your refund.   In exchange for a set up fee, a high interest rate and a two week loan, you too can get your refund 1o to 14 days earlier than you would if you e-filed.

If you are willing to wait the two week s for the IRS to issue your refund, you will save hundreds of dollars and that's what I advise you to do.

There are other potential problems with refund anticipation loans.  If the IRS challenges your tax calculations and does not issue a refund right away, you will be stuck with a high interest short term loan with very unfavorable terms.

Tax preparation services pitch refund anticipation loans by offering to finance the cost of tax preparation services into the loan as well.   Don't fall for this pitch - tax return services for simple returns often cost only $100 to $300.   Save up the money or work a weekend job but avoid high interest short term credit.

Full post as published by The BK Blawg on January 27, 2009 (boomark / email).