What Fees to Expect on a Refund Anticipation Loan

refund anticipation loan includes several fees making the loans unattractive. While it may seem wonderful to have access to your tax return funds just 24 to 48 hours after you file, most of the time these loans are too costly because you are in essence paying to borrow your own money. You have already given the government the money in the form of an interest free loan. Before the days of e-file, when it could take weeks to file a return by paper and get access to your refund, the refund anticipation loan was a good option for families who needed the money as soon as possible.

Typical fees include: a refund anticipation loan fee, an administrative or electronic filing fee, and a tax preparation fee. The fees associated with these loans are just another way for tax preparers and banks to earn more money. 

Refund Anticipation Loan Fee

This fee will be around $75 and will cover the cost of the loan origination, and credit check associated with the loan decision. This fee is not refundable if the loan is denied. If your credit is not in good shape, chances are you will be denied the loan anyway, so don't fall victim to the trap. Some companies may offer to reduce your filing and preparation fees if you take the refund anticipation loan route, but in the end, you are only costing yourself more money.

Administrative/Electronic Filing Fee

This fee will be around $100 and cover the cost of the electronic filing of the tax return, along with the storage of the tax records. Many companies store tax records for several years in the event the customer gets audited, the tax company will have record of everything they've done, even if the customer does not keep his or her records. Avoid this fee by filing on your own and keeping your own records.

Tax Preparation Fee

This fee will be around $100 and can vary depending on the complexity of the tax return and the company who prepares the taxes. Ask the company what their average filing cost is and where your return may fall if you are trying to find the best deal. Avoid the tax preparation fee by filing your own taxes.

Watch Out

The annual percentage rate on the refund anticipation loan is very high, sometimes as high as 521%. To get access to your own money 10 days sooner than you would if you filed electronically with direct deposit, at this expense, is crazy. The IRS may not agree with the refund amount you borrowed and you may be responsible for paying back money at that incredibly high interest rate.

While it is true that most refund anticipation loan amounts match the actual refund amount, there is no guarantee and in most cases, the people who file are better off waiting a couple of weeks for their money directly from the IRS.

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