The True Cost of a Tax Refund Anticipation Loan (RAL)

You’ve received your W-2 and are excited to see how large your tax refund will be. You don’t have the patience to wait for your refund, so you go to your local tax preparer and apply for a refund anticipation loan (RAL). You are approved and receive your money the next day, but to your dismay, it’s LESS than the amount of your refund. Even worse, this is a loan that will be repaid when the bank that made the loan gets YOUR tax refund.

Increased regulation has driven many banks out of the RAL business in recent years and as a result, not all tax preparation services offer them. The fundamentals, however, are still the same. The RAL is still a high-interest loan against your anticipated tax refund. Annual Percentage Rates (APR) in excess of 100% are common. Also, the loan amount will be less than your refund with the difference going to interest and fees.

You CAN get your refund quickly without borrowing against it. Simply file your return electronically and ask for direct deposit. That way, you usually get your money within two weeks. Your tax refund is your own hard-earned money. Don’t take out a high-interest loan against it.

• IRS Rules About Refund Anticipation Loans
• Center for Responsible Lending on RALs