Should you get a tax refund advance loan? There has been much debate with regards to this issue and there are many pros and cons to acquiring one. To be able to decide properly, we should first get to the root of what makes a tax refund advance loan tick.
First of all, what is a tax refund advance loan? A tax refund advance loan is a loan you can take out from a bank affiliated with your tax preparer. It is a short term loan that you may avail of in a short notice in anticipation of a possible income tax refund that could be credited to you.
Nobody likes paying taxes, so it might come as a surprise to you that there are many instances when people actually overpay their taxes. When they do, the government is nice enough to return your money to you in the form of an income tax refund.
This may happen when you lose your job in the middle of a taxable year, when you make a mistake in the calculation of your taxes, when your tax preparer makes a mistake in the calculation of your taxes, when you’ve failed to inform your tax preparer of changes in your employment status, etc. In a nutshell, something happened to your earning capacity which made you overpay the government.
Now the processing of your income tax refund can take some time. If, for example you’ve come across an unforeseen expense prior to receiving your income tax refund and you are a little short on cash, you can avail emergency tax loans to make it through.. Your tax preparer via a bank, loans you the amount and when tax refund day comes, they then deduct the loan fee and tax preparation fee from the refund that you get.
But if you feel that you really need the money at the soonest possible time and could do away with a few hundred dollars, then the decision is up to you.
It’s a free market and it’s your right to be able to make decisions for yourself. Everything has its pros and cons and that includes acquiring a tax refund advance loan. If you feel that the benefits outweigh the high cost, then by all means go for it. If you feel that that the fees are too high, then wait patiently until your tax refund is given to you. It’s a matter of weighing your options.