Refund Anticipation Loans
Avoiding Costly RALs
Refund anticipation loans may carry interest rates as high as 500 percent. AP Business Editor Mark Hamrick reports.Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 50% to over 500% APR.
They also only speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts.
Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a study by the National Consumer Law Center.
Learn more about the signs of a bad refund anticipation loan
Research
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Borrowed Time: RAL Usage Among EITC Recipients in Native Communities
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Building a Better Refund Anticipation Loan: Options for VITA Sites
Quick Links
Headlines
- Predatory Lending and Tax Refunds
NPR Online, 08/17/10 - IRS Decision on Refund Loans Not Good News for Tax Preparers
Washington Post, 08/12/10 - IRS Stymies Tax-Refund Lenders
Raleigh News & Observer, 08/06/10 - Predatory Lending Still Perfectly Legal
Loan Safe, 05/19/10
