Tax season is upon us and the scams are everywhere. So if you're in need of a refund anticipation loan, you might want to reconsider your options.
A refund anticipation loan, or refund loan, is like a pay day loan in that it is secured by your tax refund, and, for the price of exorbitant fees and interest rates as high as 600%, you can have your money immediately. Otherwise, you just wait eight to fifteen days for the IRS to issue you a check.
Refund loans are primarily marketed to the working poor, which in itself should make you weary of the product. Companies that offer a refund anticipation loan made $738 million in fees on 2008 tax returns, according to Bloomberg. These are fees that would be better off in your pocket.
While currently legal, the refund anticipation loan may soon see its end. The IRS has already taken measures to limit refund loans by blocking companies' access to information. You, too, can take measures to protect yourself from refund loans and their exorbitant fees when in need of fast cash.
In the end, a little planning and taking advantage of free services is all it takes not to fall prey to refund loan scams.