What to know about tax refund loans
Key takeaways
- Many tax preparation services offer tax refund loans that allow you to get an advance on your money.
- These loans are typically for a set amount and are offered via check or loaded on a prepaid credit card.
- Many tax refund loans are interest-free, though some charge fees.
Are you expecting a tax refund from the IRS? You may not have to wait until the IRS processes your return and sends you a direct deposit or check in the mail.
If the tax preparation service you use offers tax refund loans, you could get an interest-free advance on your money. These loans are easy to qualify for and generally don’t require a credit check. However, they may not be sensible considering you may have to spend money to access funds that belong to you.
What is a tax refund loan?
Tax refund loans are available to taxpayers who’ve filed a federal income tax return and are eligible for a refund. These loan products are generally for a set amount, between $200 and $6,000, and offered between January and late February.
How do tax refund loans work?
When you file your return, you can apply for a tax refund loan if it’s offered by the tax preparation service. If approved, the funds are dispersed by check or loaded on a prepaid card. The funding time depends on the lender and how you opt to receive the loan proceeds.
You won’t repay the lender or company offering the loan, though. Instead, it will be taken from your refund before it’s sent to you.
Where can you get tax refund loans?
H&R Block
The Refund Advance loan from H&R Block is offered to clients through Pathward, N.A. You can apply without impacting your credit score, and you won’t pay lender fees or interest.
| Minimum federal tax refund amount | $250 |
| Tax preparation fee | Starts at $89 if filing with a tax professional (an additional fee applies for state returns) |
| Early Refund Advance Loan amounts | Not applicable |
| Refund Advance loan amounts | $250, $500, $750, $1,250 and $3,500 |
| Time to funding | As soon as the same day |
| Deadline | Feb. 29, 2024 |
| Requirements | Be at least 18 years of age and e-file your tax return with a tax professional at an H&R Block office |
Turbo Tax by Intuit
The Refund Advance from Intuit Turbo Tax is also a fee-free, zero-interest loan product. It’s offered through First Century Bank to filers who use Turbo Tax.
| Minimum federal tax refund amount | $500 |
| Tax preparation fee | No charge for simple federal and state tax return filings (valid through 3/31/2023) |
| Early Refund Advance Loan amounts | Not applicable |
| Refund Advance loan amounts | $250, $500, $750, $1,000, $1,500, $2,000, $2,500, $3,000, $3,500 and $4,000 |
| Time to funding | As little as 30 seconds after IRS E-file acceptance |
| Deadline | Feb. 29, 2024 |
| Requirements | You must be at least 18 years old and not live in Connecticut, Illinois or North Carolina. You must e-file your federal return with TurboTax and report income on a Form W-2, Schedule C, Schedule CEZ or 1099-R. You cannot file with IRS Form 1040PR, 1040SS, 1040X, 1310, 4852, 4684, 4868, 8862 or 8888. |
Jackson Hewitt
Jackson Hewitt features two Refund Advance loan products, both underwritten by Republic Bank. The Early Refund Advance loan is subject to a 35.53 percent annual percentage rate, or you can get a no-fee Refund Advance Loan without paying any interest or fees.
| Minimum federal tax refund amount | $500 |
| Tax preparation fee | Not disclosed |
| Early Refund Advance Loan amounts | $300, $500, $1,000 |
| No Fee Refund Advance Loan amounts | $250, $500, $750, $1,000, $1,500, $2,500, $3,500, $4,500 and $6,500 |
| Time to funding | Potentially within minutes if funded by prepaid debit card, though it can take until the end of the day. Direct deposit takes 1-5 business days. |
| Deadline | Feb. 11, 2024 |
| Requirements | You must be at least 18 years old and e-file your return with Jackson Hewitt. You also have to have a satisfactory payment history with the IRS and other federal and state agencies (i.e. child support enforcement, the Department of Education). |
Pros and cons of tax refund loans
It depends on your financial situation. These loans come with benefits and drawbacks that could make them a good fit for some, but not others.
Pros
- mmediate cash instead of waiting for the IRS.
- Typically fee- and interest-free.
- Allows you to handle an unexpected financial emergency.
- Can help you pay down high-interest debt, make a big-ticket purchase or use the funds however you see fit.
Cons
- May come with interest charges similar to personal loan interest rates.
- If your refund is delayed you could be left with a heft debt load.
Should you get a tax refund loan?
Taking a tax refund loan can make sense in cases when you need money quickly and the loan will not cost you anything, meaning there are no fees or finance charges attached. It can also make sense to obtain a tax refund loan if it would cost you more out of pocket to wait for the money to arrive from the IRS.
For example, imagine you have high-interest debt on a credit card that could be paid off immediately with the loan. Doing so will save you from paying additional interest while waiting for the IRS to send your refund.
If you don’t urgently need the money and you don’t have any high-interest debts, it may make more sense to wait for your tax return to arrive.
Tax refund loan alternatives
If you’d prefer to explore other options or aren’t getting a refund but need cash, these alternatives could work for you:
- Online loans: Use an online lending marketplace to compare personal loan products with competitive rates. Fixed personal loans are payable in equal monthly installments over a set period, typically between three and five years.
- Short-term emergency loans: These loans act as payday alternatives and can get you fast cash without costing a fortune in interest. Some lenders won’t check your credit when you apply, so you could get approved even if your credit score isn’t up to par.
These online lenders offer fast funding if you need cash now.
| Lender | Loan amount | APR | Minimum credit score | Time to funding |
|---|---|---|---|---|
| Avant | $2,000–$35,000 | 9.95%-35.99% | 550 | As soon as one business day |
| LendingPoint | $1,000–$36,500 | 7.99%-35.99% | 600 | As soon as one business day |
| OneMain Financial | $1,500–$20,000 | 18.00%-35.99% | Not specified | As soon as one day |
| Prosper | $2,000–$50,000 | 8.99%-35.99% | 640 | As soon as one business day |
| Upgrade | $1,000–$50,000 | 9.99%-35.99% (with autopay) | 580 | As soon as one day |
The bottom line
Tax refund loans may offer a fee-free solution if you need money quickly during the brief window during which they’re available each year. But if you’re not pressed for money, it can be a better bet to wait to receive your refund from the IRS or explore other options. Just remember, when considering any type of loan, that it’s important to review all the fees and interest charges carefully to ensure you understand the true cost of borrowing.
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