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Health & Fitness

Blogger: You Do NOT Want a Refund Anticipation Loan

You can often get your refund from the IRS within 10 business days so you shouldn't have to pay fees and interest for a refund anticipation loan.

I heard a commercial yesterday for one of the large tax preparation firms advertising a refund anticipation loan and my blood started boiling. These loans provide money equal to your tax refund but they generally charge high interest rates and fees.

A study found that taxpayers paid about $800 million in loan fees and other fees for refund anticipation loans in 2008. According to the study, the effective annual percentage rate for refund anticipation loans can range from about 50% (for a $10,000 loan) up to nearly 500% (for a $300 loan), when you include interest charges and refund account fees.  These are essentially a predatory loan … and they prey on low-income taxpayers.

If you have a good accountant and you plan ahead, you shouldn't be getting a big refund because you will have been using your money to your advantage all year long and not have given Uncle Sam an interest-free loan.

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That aside, if you are expecting a refund this year, you can get your money from the IRS almost as quickly as you can by applying for a refund anticipation loan and without any fees or interest charges. E-file your taxes and have your money deposited directly into your bank account and you can generally get your refund in fewer than ten days.

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