Frozen Sooner
3/9/2009, 04:29 PM
Hopefully I don't have to tell anybody here to not use these things, but I figured I'd throw the info out there for some of our younger crowd-particularly those with kids and lower incomes that might really get victimized by this.
What is it?
A refund anticipation loan is a loan secured by an income tax refund. The loan is granted by the preparer (in conjunction with a bank) so that the taxpayer has immediate use of the funds instead of waiting for the funds to be direct deposited by the federal government.
Why is it bad?
The average APR on a RAL is about 77%, including set-up fees. I don't care how you slice it, that's usury.
Who uses this?
Typically low-income and unsophisticated taxpayers. The vast majority of people who use this type of "service" qualify for the Earned Income Tax Credit, meaning they're among the least able to afford to pay these ridiculous rates (not that rich people should have to pay them either!) Most of them don't understand that had they not taken the RAL, they'd have gotten their money direct deposited in about 10 days anyhow.
Anyhow, just throwing it out there. If you use a tax preparation service, don't sign up for one of these unless you REALLY need the money today. Otherwise, you're just taking it in the pooper.
What is it?
A refund anticipation loan is a loan secured by an income tax refund. The loan is granted by the preparer (in conjunction with a bank) so that the taxpayer has immediate use of the funds instead of waiting for the funds to be direct deposited by the federal government.
Why is it bad?
The average APR on a RAL is about 77%, including set-up fees. I don't care how you slice it, that's usury.
Who uses this?
Typically low-income and unsophisticated taxpayers. The vast majority of people who use this type of "service" qualify for the Earned Income Tax Credit, meaning they're among the least able to afford to pay these ridiculous rates (not that rich people should have to pay them either!) Most of them don't understand that had they not taken the RAL, they'd have gotten their money direct deposited in about 10 days anyhow.
Anyhow, just throwing it out there. If you use a tax preparation service, don't sign up for one of these unless you REALLY need the money today. Otherwise, you're just taking it in the pooper.