Don’t Get a Refund Anticipation Loan

Tax season is open now, which means that pretty soon we will file our taxes and hopefully have a nice refund check heading our way. One thing everyone needs to look out for is refund anticipation loans, which are loans given against your federal tax refund.

How refund anticipation loans work

When you file your taxes with a tax preparation company they will give you the option of getting your refund from them in 1-2 days instead of waiting for the check or electronic deposit from the IRS. They may also offer to take out their tax preparation costs out of your refund when it comes – that way you don’t have to pay your taxes that day.

What they aren’t telling you is that you are actually taking out a loan that is secured against your tax refund. They prepared your taxes and they know how much you are going to receive. When you agree to the RAL, you give them permission to take the money out of your tax return and pay the cost of the loan – which is often near 99% APR or higher. Some Refund Anticipation Loans may cost the consumer up to 30% or more of their total tax return.

E-file your taxes. When you e-file your taxes, you should receive your money in about 8-10 days, instead of the 1-2 days the tax companies tell you you can have it if you take a RAL. What they don’t tell you is that they can’t actually guarantee you the money in any time frame because they contract these loans through third party banks (often affiliates of the tax company).

Just say no to Refund Anticipation Loans. It’s your tax return and your money. Don’t pay someone to give it to you a couple days early. Start your tax return early and don’t pay extra.

Here is more information about free tax preparation for military members and how to e-file your taxes for free.

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Date published: January 28, 2009. Last updated: June 19, 2010.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.


  1. says

    These kinds of offers prey on people’s desire to get everything NOW. And unfortunately, it works and it leads them to pad their pockets on other people’s tax returns. Citizens could give themselves absolute insurance of a higher tax return by simply waiting a few days! This is good advice and I hope people will follow it…

  2. Yoshiyah says

    Better yet, why not just learn how to do your own tax return. It is not that hard, and you don’t have to pay anyone for doing it. It is a life saver, and you know exactly how much you will be getting via State, City and Federal level.

    • says

      That’s probably the best bet for many people. I use an account, but I have a business, which requires certain additional filings. So I prefer to have a professional there to guide me. I still review everything though because I like to know where my money is going! :)

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