Refund Anticipation Loan... Good idea? - WALB.com, Albany News, Weather, Sports

Refund Anticipation Loan... Good idea?

January 22, 2007

Albany - Why wait when you can get your money back today? Tax season is just getting started, but already tax preparation centers are busy giving out money, before the IRS even sends a check. How do they do it? Through Refund Anticipation Loans. The name says it all. It's a loan, so yes, you have to pay for what you get. Is it worth it?  It is for some.

There's nothing like the feeling of cold hard cash. Especially when it's cash you weren't necessarily counting on, like a tax return. "The sooner the better," says Sheena Frazier. And like most of us, Sheena wants that money just as soon as she can get it.

She had her taxes prepared Monday, and will get her money in about 24 hours. Frazier says, "We're doing the RAL. Wanted to get it done and over with. We're in the process of moving."

So she wanted to move some money into her bank account. It was easy.  She says, "Just bring your W-2 in, all your information, give it to the tax preparer and then sign the paperwork."

Trasheia Trent, office manager at Jackson Hewitt says the loans are good for people who really need the money and now.  She says, "If you can wait, that's fine, but if not, everybody can use some money, so why not get it now. It's due to you, so if you don't mind paying fees. I need my money now, so I'm going to pay the fees and go ahead and get my loan."

And because it is a loan, you'll have to pay a bank finance charges. The loan is only over a period of about 12 days, so the interest is high in order for the banks to make money. That's a charge on top of what you're already paying to have your taxes prepared by someone else. When asked, Is it worth that finance charge?  Sheena says, "Yeah , it's worth it."

The finance charge cost Sheena $95, and she'll get her money tomorrow. She needs it now, but says if you don't, you may as well wait until the IRS sends you the money themselves.  After all, why get a loan on money that's yours. She says, "If you don't need the money, then I would wait until it all comes in to avoid the fee."

Rule of thumb: Only take out a refund anticipation loan if you need the money immediately. If you file electronically, it only takes the IRS about two weeks to directly deposit the money into your bank account. You can add a couple of weeks on to that if you expect a check by mail. You can also get a refund anticipation loan at tax preparation centers with your last pay stub, but since you should get your W-2 by January 31st, only 9 days, it may be better, once again, to wait.

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