Avoid Pay Stub and Tax Refund Loans
What could be better than getting an advance on your tax refund from the good ole IRS? Well, you better give some thought to the fees you are paying for that advance.
America is a capitalist country and home to many creative people. You can even find them in the field of tax preparation, a bland area if ever there was. The interesting service in this case refers to loans being made by tax preparers in concert with banks to taxpayers. There is nothing inherently wrong or illegal with such loans, but it is a case of buyer beware. The fees can be atrocious.
The loans at the heart of this article are called a couple of different things. The most direct name is a tax refund loan. A less direct name is a “pay stub” loan, in reference to the use of paycheck stub information to figure out how much money to loan you. While these loans are fine and dandy, they can come with some atrocious fees.
Short term loans are inherently expensive. Why? The financing party doesn’t have a lot of time to watch interest accumulate and collect it as would be the case for a home mortgage. Instead, they need to find a way to make money on the loan quickly. They do it with fees. In the pay stub loan business, the fees often equate to 10 percent or more of the loan. That is a pretty high percentage for loaning you money for a couple of months.
Before I go any farther, it is important to understand there is nothing wrong with lenders doing this. They have every right to make money and every right to charge you fees. The burden is on you to determine whether you really need that money now. If you do, then why don’t you go ahead and file your taxes early? I know that is a shocking idea, but there is nothing prohibiting you from doing so. The IRS will now wire you the refund, so you shouldn’t have to wait to long for your mulla.
At the end of the day, it is your decision as to whether you want to take a loan against your taxes. Some will and some will not. Whatever your decision, just make sure you go in with your eyes open to the fees.
Auto Title Loans and Tax Refund Loans Explained
What is an Anticipated Tax Refund Loan?
Annually many Americans find themselves needing their refund now causing them to obtain a refund loan as a quick and simple method to get their refund quicker. These kinds of loans are essentially short term borrowing made against their anticipated refund. The consumer typically applies for an anticipated refund through a company that prepares financial returns. The amount is determined by the expected amount of their refund.
One of the many dangers with obtaining a this type of refund is that the lender may intentionally increase the expected amount in order to increase the amount of fees they charge. This creates problems for the consumer when their expected refund they actually receive is less than anticipated since the lender has already contracted for and deducted their fees from the consumers refund. Additionally, this puts the consumer at risk of being audited by the IRS for filing an incorrect return. These and other risks are reasons the government is considering legislation to restrict this kind of borrowing because they promote fraudulent activities.
A Car Title Loan is an Excellent Alternative
Though a refund may sound like a quick and easy way to obtain your income tax refund sooner, obtaining a car title loan from a title lender provides you greater benefits. Most title lenders will discloses all of their rates and fees up front. There is no leaving it up to a third party to calculate what your income tax refund will be. Thereby reducing the opportunity for higher and unnecessary fees being charged to you, putting more money in your pocket, and the chance of a false income return being filed, increasing your risk of being audited by the IRS.
Some Car Title Loan providers allow you to pay off the loan over a 32-month term. Better than that is that you may not penalized if you chose to pay off your amount sooner. Whereas in an anticipated tax refund the fees are automatically taken from your refund before you receive the amount. And fees are never waived with this kind of borrowing.
Establishing a relationship with a Title Loan company allows you to build a financial partnership that will allow you to obtain future money after you have paid off your borrowed amount instead of only during tax season each year. Obtaining a car title loan from a trusted Title Loan company helps restore or improve your credit and provides you with the comfort of knowing you have a partner with your financial needs. It is clear to see how a good company provides you more options and benefits than the anticipated tax refund loan.
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