BBB Breaks Down Risks Of Refund Anticipation Loans

Tax preparers often offer Refund Anticipation Loans to allow you to immediately receive your tax refund. However, RALs are not an actual refund from the IRS but are a short-term loan from the company. According to the Consumer Federation of America, the interest rate and administration fees on RALs can range from 40% to over 700% of your refund. Refund Anticipation Loans may do more harm than good and just aren't worth the instant access they provide. It's a lot of money to spend to borrow your own money for two weeks. To avoid RALS:

· Work with debt collectors and let them know a refund is on the way.

· Consider filing your taxes electronically and requesting to have your money direct deposited. While this entire process usually takes 10-14 days, you will receive 100 percent of your money and not have another loan to pay off as you would with a RAL.

· The IRS is working to eliminate RALS. In 2011, they stopped providing tax preparers with a debt indicator notification which was used by tax preparers to decide which customers to offer a RAL.

· For additional information you can trust or to find a trustworthy tax preparer, start with bbb.org.