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How to Get a Loan Against Your Tax Refund

You can get a loan against your tax refund if a "tax advance refund" is offered by the tax preparation service you choose.

Tax preparation companies don't lend you the money directly. Instead, they partner with banks that lend the funds. Once you receive your tax refund, that amount or a portion of it goes to the bank to pay off the loan.

Tax advance refunds are often advertised as charging no fees or interest. These loans can be useful if you need cash right away instead of waiting for your tax refund to arrive, but before you apply, but it's important to read the fine print.

Where Can I Get a Tax Refund Loan?

Many tax preparation companies—including H&R Block, Jackson Hewitt and Liberty Tax—let their customers borrow against an upcoming U.S. tax refund. While these companies have many brick-and-mortar locations, they also have an online presence, so you can apply for a loan in person or online.

If you prepare your own taxes, you don't have to go to a tax preparer to get a tax refund loan. Online tax filing services, including TurboTax and TaxAct, also offer refund loan options.

How to Get an Advance on a Tax Refund

Tax refund loans are appealing because they allow you to get a quick loan that's equivalent to the money you're owed from the government. Depending on the company you use, the loan can be ready for you within 24 hours of applying. That's a pretty big difference from having to wait the six to eight weeks it generally takes for the IRS to issue your tax refund check when you submit a paper return. If you file your taxes to the IRS electronically, it typically will take less than three weeks, and the process can be expedited if you opt for direct deposit rather than a mailed check. In any case, those weeks can crawl by when you need the funds to pay your bills.

As long as you expect a refund, you are eligible to apply for a loan. You may not be able to borrow the entire amount due, however, as most companies cap the loan below your full refund amount in case the predicted refund amount is inaccurate. Many companies also have established minimums and maximums. Jackson Hewitt refund loans, for example, start at $200 and go up to $3,200, while TurboTax offers advances of $250 to $2,000.

In the event that you or your tax preparer made a mistake on your tax forms, you could get less back than you anticipated. If you borrow more than your tax refund amount, you'll be responsible for repaying the debt your tax refund doesn't cover. Some tax preparers will absorb the difference between what you borrowed and what your actual refund is, but ask them about their policy first.

Outside of filing errors, there are other potential reasons your tax refund may be lower than you or your tax preparer anticipates. For example, the IRS may deny certain deductions, causing you to owe more. If you're behind on child support payments or have a tax lien, the IRS will withhold some or all of your refund depending on how much you owe.

How Much Does a Tax Refund Advance Cost?

The majority of tax preparation companies offer tax advance refunds without charging you interest or adding fees to the amount you borrow. That doesn't mean they're free, since the cost is embedded in the price to use the service in the first place. For example, if you use H&R Block to file your taxes, you might pay more than the $59 the company typically charges.

Beware of other fees that could be tacked on to the refund loan. For example, if your tax refund loan is issued to you via a prepaid debit card, there is usually a small cost associated with it.

You can escape any filing fees by completing your own taxes. The IRS provides free software that you can use if your income is below $69,000 and free fillable forms if it's above that income threshold. To avoid needing a refund loan altogether, plan to file your taxes earlier in the year to get your tax refund sooner.

Can I Get a Tax Refund Advance With Bad Credit?

To qualify for a tax refund loan, you typically don't need to have good credit scores. Because you are borrowing against money that's coming to you anyway, a tax refund loan doesn't pose the same type of risk to lenders that a traditional loan or line of credit does.

Still, the lenders that some companies use will conduct a complete credit check first. If so, that will result in a hard inquiry being placed on your credit report, which will temporarily factor into your credit scores. But if they only do a soft inquiry (or don't check at all), your credit history and scores won't be affected.

The Bottom Line

If you need your tax refund money right away and already were planning to file through a tax preparer, there are few downsides to rushing the process with a tax refund loan. It could even benefit your credit if you use it to tackle existing debt. Check your free Experian credit report to see where your credit is and help you decide which debts you should tackle first.

Still, be sure to run the numbers, including any extra fees, and only explore a tax refund loan if the benefits outweigh simply waiting for your tax refund to come through in full. If ultimately you find that a tax refund loan isn't an option after all, you may consider applying for a credit card with a promotional 0% annual percentage rate (APR) or a low interest personal loan.