February 5, 2007
You've all seen the signs: use your W-2 as a down payment for a new car or get your tax return refund immediately.
They all sound great--but as usual, there is more to the story than those signs are telling you.
They're called refund anticipation loans. You can get your tax return refund fast, but you might not know there can be an expensive catch connected to them.
Here's how they work. You go to get your taxes done at a tax preparation center like Liberty Tax Service or H&R Block, but you want your refund right now.
Many tax preparers have a bank they contract with to provide you a loan for that money.
Trouble is, it is just that: a loan. And many times you will have to pay a lot of fees and interest on it.
That means your refund will end up being a lot smaller in the long run.
But there are some situations where that might be the best option.
"If you've got rent due or car payments," said Chad Barrs of Liberty Tax Service. "A lot of people have been using them as a down payment, so they'll come in and need it really quick."
If you do want a refund anticipation loan, make sure you ask to see how much in the way of fees and interest you are going to have to pay.
And if you don't want to pay them, just file electronically and you should have your refund in two to three weeks at the most.