What You Need to Know about Advance Loans

By Roxy Caines

The holiday season is filled with ads promoting specials for toys, electronics, and even loans. Have you seen offers to get part of your tax refund immediately? Here are four things to consider first if you are tempted by these advance loans.

1. Refund delays continue

In 2015, Congress passed legislation for a refund delay that holds tax refunds claiming the Earned Income Tax Credit (EITC) and the Advance Child Tax Credit (ACTC) until February 15. This legislation aims to complete additional identity verification processes and help reduce errors in claiming these tax credits.

During the tax season, tax refunds will be delayed again. This means that even if you file your taxes in January, you will get your refund after the third week of February. This delay applies to all tax preparation services. You cannot pay someone to provide a quicker tax refund.

2. The advance is a loan that you are responsible for paying back

Eventually, your tax refund will pay back the loan. When the IRS issues your tax refund, it will be reduced by the loan amount. If your refund doesn’t cover the entire loan amount, you may have to pay for it out of pocket.

3. Advance loans are not completely free

With zero percent interest and no fees, these are low-risk loans compared to refund anticipation loans (RALs) available in previous years. But to get these loans, you must pay to file your taxes. This is unnecessary since the loan doesn’t provide your tax refund quicker, and you can get your taxes done for free at a Volunteer Income Tax Assistance (VITA) site or by filing your own taxes online at GetYourRefund.org or MyFreeTaxes.com.

4. Not everyone is eligible for an advance loan

Each company has their own criteria for issuing advance loans. They will need to verify your identity, evaluate the risk of offering you a loan, and assess other factors.

Although some companies see if you’re eligible for a loan before filing your taxes, some don’t tell you if you qualify until after paying for tax preparation. Why pay when you can get your taxes done for free?

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