Signs of a Predatory Tax Refund Loan

If you're expecting a refund this tax season, you may be tempted to use an "instant refund" or refund anticipation loan (RAL) this year. Before you or your family give your hard-earned money away, check out these four signs of a predatory refund anticipation loan. You'll see why most RALs are just a raw deal.

SIGN 1

HIGH INTEREST RATES

The annual interest rate of the predatory tax refund loan can be as high as 500%. These costly rates drain your hard-earned money.

SIGN 2

EXCESSIVE FEES

In addition to a high APR, bad tax refund loans are often loaded with unnecessary “administrative” fees.

SIGN 3

INSTANT CASH PROMISES

The idea of “instant cash” may sound good, but in reality refund anticipation loans only speed up the refund process by a few days.

SIGN 4

LARGER REFUND GUARANTEES

Be wary of any tax preparer that guarantees a larger-than-expected refund, particularly if such promises comes with more fees.