Exploring the Tax Refund Anticipation Loan (RAL)

The tax refund application loan (RAL) is basically a loan that is given to individuals against their income tax return, by several preparation companies. Typically the RAL can be approved quickly for most people and the funds released within a few days. Below is additional information about RAL including some pros and cons to consider.

How RAL Works

You can apply for a loan against your own tax refund. You will file with a preparation company and determine the amount of refund you should be getting. Then, a check will be done to ensure you do not have any liens against you. You can borrow part of or all of the return that you will be getting back. Once approved, the money will be available to you within a day or two. When your actual return arrives, the loan will be paid back with interest and if there is any remaining, you will receive the excess. If you are considering this type of loan, be sure to consider the interest rates and fees that are added on to determine if it is worth it.

Benefits of RAL

The benefit to RAL is that the money from your tax return is available for you basically right away. This can be helpful if there is an extreme emergency that requires you to have immediate cash. For the most part everyone is approved and the turnaround time is very short since no credit check is required.

Drawbacks of RAL

The main drawbacks to RAL are the high service fees and interest rates that are tacked on to the service. This type of loan is similar to paycheck loans where you can get an advance on your check. The money is there quickly, but you will end up paying back a high amount. There have been interest rates attached to RAL that are over 200 percent. If you wind up going with a RAL, you could pay hundreds of dollars to borrow your tax return of a few thousand for a week. If you can possibly avoid this option and wait the extra week or so for your return, you can avoid hundreds in fees. This type of loan should not be used unless absolutely necessary. Instead of turning to RAL, consider filing your taxes on-line. This can help to speed up your return and allow you to have it deposited directly into your account. If a bank account is not accessible to you, a pre paid debit card can be purchased and loaded electronically with your tax refund money. This will help to speed up the process of waiting for your return in the mail.

Reasons for Rejection

While there is no credit check to obtain a RAL, there is a check for liens. If you have back taxes, child support liens or student loans past due, you may be denied of the loan. If the lien or past due loan is for less than your refund, you may be given access to the excess amount.

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