How much is that refund loan really costing you?

It’s that time of year again – the H&R Bloch and Jackson Hewitt guys are thinking of clever ways to get you in the door to get your taxes done, and more importantly, to get a tax refund loan.

Tax refund loans, also called rapid refunds or refund anticipation loans, are loans against your tax refund.  With these loans, you receive your refund in a couple of days instead of a couple of weeks. 

Unfortunately, tax refund loans can be very expensive, with fees ranging from $29 to $120 (this is just the refund loan fee, it does not include the fee to have your taxes prepared or electronically filed).  That translates to an interest rate of 40 to 700% APR.  Taxpayers who take advantage of refund anticipation loans pay an average of 200%, just to receive their refunds a few days earlier.

Instead of paying triple digits in interest to get your refund back faster, here are some tips on how to get your refund back fast, without a refund loan:

1. File early
2. File electronically 
3. Request Direct Deposit for your refund
4. Make sure you have the correct documents (W-2s, 1099s, etc.)
5. Check your return for errors – incorrect Social Security numbers, addresses, etc. can delay a refund.

And possibly the best thing you can do… if you typically receive a large refund, change your withholding so that less taxes are withheld from your paycheck.  That way you’ll get extra money with each paycheck instead of getting a large refund each year.

Tags: income taxes, tax refund, refund loan, rapid refund