What Are Tax Refund Advance Loans and How Do They Work?
Tax refund loans are short-term loans taken out against an anticipated tax refund from the IRS. They are only available to taxpayers who have filed an income tax return and are eligible for a tax refund.
They are usually available between the winter months of January and February and are generally between $200 and $6,000, depending on the tax preparer or lender.
After filing for a tax return through a tax preparer, you can check with the service if they offer tax refund advances and apply for one if they do. If your application is successful, the funds will be sent to you by check, loaded on a prepaid card, or deposited in your checking account.
Generally, the tax refund advance is usually deducted directly from the refund before the remainder, if any, is sent to you.
Is Taking out a Tax Advance Loan A Right Choice for Me?
This depends on what your loan needs are. If you need a short-term loan around February, a tax advance may be a good option. The IRS can provide you with a tax refund three weeks after getting your e-filed returns, and up to six weeks for paper returns.
Can’t wait for that long, and have little to no savings to bank on? Then get a tax advance loan.
Depending on your lender and the refund option, you should get funded just in time to take care of your emergency bills and expenses. Tax advance loans are also a very convenient financing option to explore.
Look at it as borrowing your own money. You can automatically pay the loan as soon as your refund is processed. You can even elect for the lender to directly receive the deposited tax return. Some lenders also do not charge interest fees.
You are advised to exercise some caution in taking out a tax advance loan though. Do not be tempted to take more than your tax refund estimate. Also, a tax advance loan is not exactly ideal if you need a long-term loan. It’s meant for short-term financing.
Am I Eligible for a Tax Refund Loan?
There are not so many checklist boxes to tick when it comes to tax refund loans, as their eligibility requirements are not so difficult to meet. It makes it even easier that the credit score requirements in tax refund loan applications are not dismissive of people with bad credit.
Your eligibility hinges a lot on how much tax refund you are expecting from the government and if you are at least 18 years old. People younger than 18 are not eligible for tax refund loans. Other considerations include how much debt you owe, and your tax history with the IRS.
A lender also wants to be sure that you can verify your identity using a government-issued ID and can provide your contact information, and social security number. These requirements are general. There are more lender-specific requirements.
Lender-specific eligibility requirements include that the borrower e-files their tax return through them, does not file with certain IRS forms, or does not live in some states. For instance, one prominent eligibility requirement of Turbo Tax by Intuit is that the borrower must not live in Illinois, North Carolina or Connecticut.
Where Can I Get Tax Refund Loans?
There are a lot of tax preparers and tax refund loan lenders out there. But only few are comparable to the likes of Jackson Hewitt, H&R Block, and Intuit TurboTax.
Jackson Hewitt
Jackson Hewitt provides its users two tax refund advance options - Early Refund Advance Loan and No fee Refund Advance Loan. Jackson Hewitt pegs the APR of the former at 35.9% while the latter has a 0% APR.
Both refund advance options require you to submit proof of income while the no fee refund advance loan option also requires you to support your documentation with a W-2. Cash can be deposited on your prepaid card within minutes to a few hours while it may take one to five days to get it if you want it deposited in your checking account.
H&R Block Refund Advance
Depending on your refund amount, H&R Block can get you an advance worth $250 - $3500. One Of the biggest perks of using H&R and many other established brands is that they charge no interest on the loan. You are not charged any finance charges or fees either. All you have to do is complete its application process and your cash can be ready the same day.
The cash is loaded on an H&R Block prepaid card, from which you can initiate a transfer by check or ACH at no cost.
Intuit Turbo Tax
This services’ tax advance loan scheme is sponsored by First Century Bank and can give you access to an advance of $250 through to $4k, in steps of $500 ($250, $500, $750, $1000, $1500, $2000, $2500, $3000, $3500). There are no interest or loan fees associated with Turbo Tax’s loans.
Typically, cash is deposited in the user’s checking account in an hour or two after the IRS accepts the return. However, you must file your taxes with Turbo Tax to be eligible for their tax refund advance.
What Is The Total Cost of a Tax Refund Loan Cost?
The total cost of tax refund loans can be a little costlier than people presume. With some lenders, it feels exactly the same as taking out a payday loan or any other short-term loan with their unusually high-interest rates. That said, there are tax filing services that charge comparatively lower than their peers, and make it a truly attractive credit option.
In general, a lender may charge you an application fee, and then, a filing fee, if they are helping you file your taxes. You may also pay another fee, usually little, on receiving the loan depending on whether you receive it via check or on a prepaid debit card. On top of these fees, you may or not pay interest on the loan, depending on the lender.
Summarily, the total cost of getting a tax refund loan is interestingly familiar to short-term loan patronizers. However, it remains a good option, if not better, because it’s still a little less expensive than some loan alternatives. Your credit score doesn’t count when applying for one also. It’s definitely a better option than any loan for bad credit. Also, its eligibility criteria are very easy to meet.
Are There Alternatives to a Tax Refund Advance Loan?
Yes, there are. One is to wait for the tax refund which can take roughly two to three weeks. You may want to try out the following if you want a quicker fix other than a tax refund advance loan.
Personal loans
Comparatively, personal loans have a fairly low interest rate and can be paid over a longer period. It’s therefore one credit option to consider. They can also be taken out for any purpose. A loan broker like iPaydayLoans can connect you with numerous lenders who offer up to $35k. They are usually more manageable than short term loans.
Payday alternative loans
If a tax refund advance loan doesn’t come through early enough, you can opt for a payday alternative loan. They are a quick-fix alternative and involve no hard credit checks. The repayment term though is small, usually between two to four weeks.
Loan apps
Loan apps are also a good alternative source of funding. They are usually processed very quickly, and easily and involve zero physical documentation. They also charge zero interest rates on loans. However, users may be charged a subscription fee, and another if they want funds to be processed quicker than usual.
0% APR Credit Cards
Usually, people with good credit standings are eligible for 0% APR credit cards from time to time. Check to know if you qualify for one. The juicy part of this line of credit option is that the interest rate is 0% and the loan term can last for as long as twelve to eighteen months.
Conclusion
A tax refund advance loan gives you access to some instant funding while you wait out your tax refund preparation by the IRS. If the government owes you any form of a refund on tax returns and you need to cover an immediate expense, you can simply take out a loan against this tax refund advance. Look at it as taking out money from your own cash.
You can opt for alternatives like installment, personal, and payday loans if a tax refund advance loan isn’t viable. iPaydayLoans can help connect you with lenders who can provide you with these loans at fair interest rates and loan conditions.
 | Why Us | |
|---|---|---|
| How much can I borrow? | $50-$35,000 | No hidden fees or charges |
| I have bad credit. Can I apply? | Yes | Bad credit is considered |
| Over how long can I spread the repayments? | 1-36 months | Fast decisions |
| Are credit checks involved? | Yes | Soft credit checks only |
| Chances of getting approvals | Good | 256-bit encryption protocol |
| How to apply? | Apply online | Easy application |
FAQs:
When can I get a tax refund loan?
Tax refund loans become available once you file your tax return. They are typically available in the winter months of January through to February; sometimes late December too. However, the exact time you can get a tax refund loan still hinges a lot on the tax preparation company and their guiding policies.
How quickly can I be funded with a tax refund loan?
This also depends a lot on the tax preparers or lenders. It takes some a day or two after the IRS accepts your tax return to process. A few others can process it and fund you one to two hours after IRS’ e-file acceptance.
Is it possible to get a loan on my tax refund if I’ve already filed?
Yes, you can. You may be able to apply for a short-term loan against an expected federal income tax refund if you filed your tax return through a tax preparer and are expecting a refund. If you file your taxes yourself, you do not need to go to a tax preparer. You can easily use an online tax filing service that offers refund loan options also.
What are the advantages and disadvantages of tax refund loans?
The biggest pros of tax refund loans are that they help you stay on top of your finances, give you quick access to cash, have easy-to-meet eligibility criteria, and can be really convenient to repay since the tax refund can be sent directly to the lender. Its cons are that they are hardly free, and you could end up with less than you expected, yet, you have to repay the approved loan amount in full.
Must I have a good credit score to qualify?
Not necessarily. Tax refund loans are not exactly on the same scale as other lines of credit. They do not pose the same type of lending risks to lenders. Since they are taken out against money you are expecting to come in anyway, your credit scores matter very little. You do not need a good credit score to qualify for one.
Will my credit score be affected?
This depends on the lender and what type of check they run. Credit checks are required and so must be run on every borrower. However, they do not impact your credit score if they are soft credit checks. If they are hard inquiries or checks though, they may cause your credit score to drop by a few points.