Beware of Tax Refund Loans
It’s the day after Tax Day and many still have not filed their taxes. For those of you who have procrastinated and are tempted to take out a tax refund loan to “speed up” the process or “bridge” the financial gap, please take a look at the hard facts.
A study conducted by the National Consumer Law Center found that almost 9 million Americans (1 in 5 taxpayers) paid out $901 million in fees on tax refund loans in 2007. Interest rates on tax refund loans range from 77 percent to 140 percent for the average refund loan of $3,000. Many taxpayers taking out tax refund loans are desperate for money but these loans often put them deeper in debt just like payday loans and car title loans.
It’s really simple, don’t do it. If you file your own tax return electronically it will only take about 15 days to receive your tax refund. If you are truly down to the wire in terms of money to pay your rent, utilities or buy food, then you probably are in a lot more financial trouble than you fully realize. Needing to take out payday loans, tax refund loans and other types of short-term loans is usually a sign that you may need to filing bankruptcy.