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True cost of Refund Anticipation Loans

Uncategorized August 29, 2017

Refund Anticipation Loans

Refund anticipation loans are short-term loans secured by your income tax refund. Although the business preparing your income tax return will give you the money, you are actually receiving a loan from a bank or finance company. 

You may not realize how much this loan is really costing you because you do not have to pay any fees associated with obtaining a refund anticipation loan at the time you receive the money. For example:

  • Your refund is $1,500.
  • The fees associated with filing your income tax return with the tax preparation service and getting the refund anticipation loan equal $300.
  • You will receive a check for $1,200.
  • But you are actually paying $300 in fees to obtain your income tax refund.


It is important to remember that the paperwork you sign to receive a refund anticipation loan will legally obligate you to repay a $1,500 loan.


So, if your actual refund is only $800, you are responsible for repaying $700, plus interest to the lender that made the refund anticipation loan.

And the higher the loan amount, the higher the refund anticipation loan fee will be.


Costs of a Refund Anticipation Loan

Here are some typical costs associated with getting a refund anticipation loan.

Tax preparation fee


Refund anticipation fee


Electronic filing fee


Document preparation


Total Cost



When you electronically file (e-file) your tax return and request direct deposit, your refund is often deposited in your bank account within two weeks. Sometimes refund anticipation loans take just as long, yet cost you substantially more money.


Many organizations host Volunteer Income Tax Assistance (VITA) sites. VITA is an Internal Revenue Service (IRS)-coordinated program that provides free income tax assistance and e-filing. Income eligibility restrictions may apply. Contact the IRS for a location near you.



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