RICHMOND, VA (WWBT) – Tax season is here and most people can't wait to cash those refund checks. If you want money right away, there are loans called Refund Anticipation Loans. They can get you your money quickly but some financial expert say beware, it comes with a price.
Financial Advisor Patrick Owens with Clear Point Credit Counseling Solutions, understands why people want their refund as quickly as possible. But he's all about money management.
"You want it now, what are you going to spend it on? Is it an emergency that you need it for or is something that is more of a want instead of a need?" he said.
He's warning consumers rushing to get quick refunds to stay away from the anticipation loans. They promises you your money in about 24 hours, if the IRS approves your returns.
"The problem is that there are normally fees and high interest associated with that because they are not going to give you the money for free, just to be repaid back at no gain for them," said Owens.
RAL is basically a loan on money you think you're going to receive. You have to apply and most tax preparers offer the loans. But consumer experts say that quick money comes at a price. Their message is don't pay to collect your money.
"The other big issue is that you think you are getting this amount of money now, but what happens if your return is lower or no return at all and you owe the government? Well, you now have to pay back that full loan, plus the fees and the interest," Owens stated.
The best way to avoid the fee is to not sign up for the loans. Keep in mind you can get your money for free and pretty quickly by selecting other methods. The experts recommend avoiding the paper documents and filing your taxes online and signing up for direct deposit. Using this method, you can get your money in several days.
"Normally the people who fall victim to those type of high interest loans, tend to be the ones that are in lower income areas. They may feel they don't have any other alternatives," he said.
The Center for Responsible Lending says an anticipation loan usually charges about 149% in interest. The price is a little over $61 to borrow $1500 and this doesn't include other fees.
"If you think about it, it is a lot like payday loans for your taxes," said Owens.
Another important piece of advice, consumer experts say when you do get your refund, don't just blow it. Prioritize, use it to pay off debt, for home or car repair or put in a savings account. Financial experts say if you decide to apply for one of the loans, make sure to ask lots of questions and understand your obligations. The IRS says, tax preparers who offer this service must spell out terms and conditions. For more helpful tips you visit the sites below.
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