The Pros and Cons of Getting a Tax Refund Anticipation Loan

Hands putting coins in piggy bank - tax refund anticipation loan article 1The excitement of getting a tax refund can a very thrilling and happy experience! You know you have a nice sized check coming to you for all of your hard work you have done throughout the year. However, you don’t know when the check will arrive exactly!  It can take many weeks, or even much longer, as we have seen over the last few years.

Now this can be a big problem for some people, especially if they have plans to use the money for something that is time sensitive, or for a financial emergency that has arisen! However, there is a great service online that can help with this problem, it is called a tax refund anticipation loan!  This newer Fintech, can be a very useful tool, but it can also come at a cost!

Traditional refund anticipation loans can charge high interest rates and fees if not paid back on time. Since they’re a short-term loan, the APR usually comes out to be quite high, and that is why paying them back on time is a must. This however is a very simple procedure, and also getting one is a very simple thing to do as well, as all you need to do is go online to find the top sources for tax refund anticipation loans!

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Now let’s dive deeper into the Pros and Cons of popular financial product:


You Don’t Have to Worry About Your Credit

Tax preparation companies, like H&R Block, don’t look at your credit to determine your eligibility for a tax refund anticipation loan. This is unlike any other loan you’ll find on the market. You can have no credit or even bad credit and still get your refund in a few short days.

You Get Your Money Fast

Tax refund anticipation loans give you access to your tax refund within a day or two rather than six to eight weeks. If you need the money to pay off debt, pay for an expense, or any other important reason, it can be a low-cost way to access your funds when you need them. You can avoid taking out a personal loan or charging the expense on a credit card, saving yourself interest charges.

You Won’t Pay Excessive Fees

Tax preparation companies, like H&R Block, don’t charge interest on the tax refund anticipation loans. While you technically still pay for the loan because you pay the company to prepare your taxes, you don’t pay interest or penalties. The tax preparation company takes the funds right from your tax refund.


It Isn’t Cheap

These Advances on your Tax Refund are typically cheaper than traditional loans, however, they still have a high interest rate and thus should be paid back quickly.  If this is done correctly, then they will cost you something, but that something typically will be well worth the cost of what it was needed for.

They Don’t Help you Build Your Credit

Typically, when you take out a traditional loan, the bank reports it to the credit bureaus. If you make your payments on time, it can help you build credit. Your payment history and types of credit help you show that you’re responsible and able to manage your credit. Tax refund anticipation loans don’t offer any of these benefits.

It’s Risky to Borrow on Something You Haven’t Received

While IRS refunds are as close to guaranteed as you get – something could go wrong. What if a mistake was made filing your taxes? If you aren’t getting the refund you anticipated, you’re on the hook for a loan with no way to repay it.


Before you take out a tax refund anticipation loan, you should consider all your options. They are a great tool to have as a last resort for financial help, however they are expensive. But if you have no other options then make sure you look into the company you want to use.  Make sure that you can find a reputable company, like tax refund loan advance, as they will be receiving your sensitive information.

It is nice to know that you have a last resort option available to you at any time, however we highly recommend that you try and make sure that you never get to the point!  By budgeting, planning, and staying on top of your finances, while also creating an additional failsafe like an emergency fund, is the best way to go about creating financial success.


Interesting related article: “What is a Refund?”