Refund Anticipation Loan (RAL)
When you work for a reputed firm and start earning, income tax is the one which is going to run behind you. You would be worried about the tax to be paid and will be confused of the procedures to be followed. Refund anticipation loans will help you to a great extent. Refund anticipation loans are the short term loan with high interest rate that commercial tax services offer to tax payers as a way for filers to get their tax refunds faster. This type of loans are secured by the filer's anticipated tax refund and does not last more than ten days. This mainly focuses on the cost of the working poor taxpayers over $500 million a year.
In the US, the citizens of America will let others borrow their own money through a refund anticipation loan. The refund will be your tax refund amount and it will take not more than 2 days. This will help you to get the money as early as possible.
Features
Refund anticipation loan refers to the amount that is paid as income tax and you can take the loan from the tax you have paid. This type of loan can be taken when you are in need of financial aid. It is not used much in the US when compared to other types of loans. It is a quick, easy and safe way to take the loan because this type of loan is given to you on the spot by your tax preparation service. Most of the banks and other financial institutions offer refund anticipation loans. If you require refund money immediately, you will have to use the bank products. They are very expensive and are not usually available to those with bad credit history.
Benefits
Opting for this type of loan will definitely have beneficial factors:
- With this type of loan, you will get the oppurtunity to work with the decision makers who are known for their flexibility and discretion.
- You can accomplish larger transactions and this may be of great significance especially if it is based on international business.
- This type of loan will be a better option for you, if your accounts are perfect and are dealing with strict requirements.
- Banks are known for its safety and makes it to be conservative than the private lenders.
Pros and Cons
Refund anticipation loan will be a better option for you to get back the amount you had paid as a tax, as a loan. This will be a greater help for you in the need of financial aid. This type of loan include both merits and the demerits:
Pros
- In this type of loan the fees are deducted from the amount of your refund. This would help you if you are short on cash.
- This type of loan include tax education, which mainly focuses on to provide education regarding their tax resposibility.
- It takes initiative to educate workers about electronic filing which will lessen the burden of filling the forms.
- The processing period is short compared to other types of loans.
- The annual percentage rate on refund anticipation loans can be over 500% and they allow taxpayers to receive cash refunds as early as possible.
Cons
It is important for you to know the demerits of refund anticipation loan:
- You will have an option of getting the refund with the bank products. Bank products will be very expensive to those with bad credit history.
- In the process of the loan, the bank does not receive the full amount of your refund from the Internal Revenue Service. You will be held responsible for the amount to be refunded.
