There are easy ways to get large tax refunds in advance. However, this may not be wise because it could be costly. The IRS is preparing the next tax season and you’d better be ready for it.
Millions of Americans are dreaming of a large payment when they file their tax return. In this way, they can get rid of any loans or debt they may have. On other occasions, they just need to buy expensive things they cannot afford, or they need to pay expensive medical expenses.
Loans to have early access to your tax refund is a way to receive your money as soon as possible. Many experts do not recommend doing this because of several reasons.
What are the disadvantages of tax refund loans?
The main disadvantage is the fact that you are paying money to get the money that you are entitled to. In most cases, they are not necessary at all and you simply get one because it is an “instant” or “fast refund”.
Many taxpayers are not aware of the fact that they are costly. Does it make any sense to pay money to get the money that is yours? Well, it sometimes may be an option if you are in an emergency situation.
Bear in mind that the money lenders that offer tax refund loans are not bank lenders. Since they offer to get your money in just 7 days many taxpayers are attracted by that idea. However, you should not forget that there are fees. Therefore, it is not free.
What is more, you will have to pay an interest rate as you give that money back. Sometimes you might end up paying hundreds of dollars for getting your tax refund faster.
Taking a tax refund loan could be risky
Any loan implies some risk. Imagine your tax refund is delayed or you do not get the amount you expected. In that case, it may take longer to pay it back and it could be even more expensive.
If the amount of your tax refund is lower than expected, you will have spent more money than you have actually received. Paying a tax refund loan in the long term can be extortionately expensive.
That could imply getting into trouble because you may end up in debt. Besides, if you need to have a great credit score, this could be negative. The fee you must pay could be as much as 100 dollars.
The thing is there are better ways to achieve an instant refund. Obviously, saving money and sticking to a monthly budget will allow you to wait until the IRS sends you your tax refund. The may take up to 21 days, but in most cases, it will be a little longer than a week.