Refund Anticipation Loans aka Legalized Loan Sharking

With tax season in full swing now we have been seeing plenty of ads claiming “don’t wait, get your refund now.”

Sounds great doesn’t it? I mean your refund is YOUR money, you paid it to the government, you should get it as soon as possible! Well the average turn around time from the IRS is about 7-10 business days when you do direct deposit and that’s not too bad considering they have been holding in the excess taxes you paid for the entire year.

The problem here is the companies that offer “Refund Anticipation Loans” also known as RAL’s.

In all the ads they sound like wholesome, goody-good companies that just want to get you your money faster, as in, on the spot instead of 7-10 days. However, they are no better than the shady “payday loan” or “car title loan” companies.

It is the same premise of “we’ll loan you money because you cannot wait another week, but in exchange we’ll charge you an unheard of interest rate, sometimes as much as 30%, for the privilege of getting your money today” that you see in the above mentioned companies. The reality though is it is not only the “fly-by-nights”, but that there are legitimate, nationwide tax businesses that are getting in on the action and actually depend on revenue from these high interest loans.

These “loan sharks” prey on the impulsive and irresponsible. Even worse is they never really let you know up front how much it costs to get your money now instead of waiting a few days or even a week. It is all buried in the fine print behind the smiling faces on the ads or the picture of the guy holding up hundreds of dollars he just got simply for getting his taxes done.

The worst aspect of all of these companies is that they are so intent on getting you in and out that most do not let you know up front that there is an added fee for this service. If they do, they usually mention it in passing after telling you how much your refund is going to be and instead ask questions like “what are you going to do with all that money?” In the end you don’t realize that you just paid $300 or more simply to get your money today instead of 7-10 days from now.

Our job as a professional tax service is to inform consumers of the risks of flashy guarantees that are nothing more than good ol’ “bait and switch” tactics. We mentioned a few in a previous article titled: Buyer Beware! Watch Out For All The “Free” and “Guarantees” In Tax Ads.

The difference here is that those ads are easier to see through as most people know that nothing is truly free(there’s always a catch) and that the only guarantees in life are “death and taxes”. For the RALs, the tax service, some of which are simply pay day or title loan offices posing as tax services, depends on a client that is just too excited or impatient to get their refund today that they overlook how much they are getting taken advantage of by taking out the RAL.

Before you make the mistake of going to one of those “loan sharks”, contact us for a FREE consultation and you can decide for yourself if we are the honest and direct tax service that you need.