Tax refund loans

What is a tax refund loan?

A tax refund loan is a loan that a lender makes. This loan is sometimes called an “anticipated federal income tax refund”. Typically, you will see that all tax refund loans start their offers at the beginning of the year, i.e., January till the end of April, which also coincides with the end of the tax season.

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How a Tax Refund Loan Works:

Those who pay an additional amount of tax which includes interest and fees, can get a tax refund loan. The lender will add this amount to your bank account, which made the loan in the first place. The government body will then send back the refund. Even if the refund is less than initially anticipated, you should still pay the total loan amount. How much ever is the tax refund amount is, should be repaid by the customer.

Where to find tax refund loan alternatives?

Find alternatives here!

Sometimes, the loan lenders can reject your request for a tax refund loan. In this case, there are plenty of other alternatives you can go for. Check out the list below to know about tax refund loan alternatives:

Short installment loan:

This type of loan is paid back to the lender in terms of installments. The installment amount can range from $1000 to about $5000 monthly. The range for repayment can also vary from about 3 months if you are paying off more significant amounts in a month or may even take up to a year if you are playing off the loan in small installments per month. Many short term installment loan lenders do credit checks but not from any of the major bureaus. Therefore, you don’t have to worry about not having a decent credit score for installment basis loans.

Personal loan:

This type of loan is similar to quick installment loans. The main difference is that you need to have a good credit score to get a personal loan. The amount of loan can range from as low as $500 up to $35,000. The range for repayment can also last up to 7 years. This type of loan is the best alternative if you want to borrow a large amount of money and have a good credit score.

Payday loan:

This type of loan is typically kept as a last resort for most people looking for a loan. The amount of money for payday loans generally are about $1,000, which is repaid after a short period of 14 to 30 days. A payday loan is the fastest way to get a loan because the priority for payday loan lenders is to verify a monthly income rather than a credit score check. This type of loan is the best if you don’t have to borrow a lot of money but need it quickly.

Who can qualify for a tax refund loan?

 You can qualify for a tax refund load if you:

  1. Have paid more tax amount in advance based on self-assessment, rather than the actual payable tax amount, based on regular assessment.
  2. Your TDS from interest on debentures or securities, salary, or dividends is high compared to the actual payable tax amount based on regular assessment.
  3. The charged tax based on regular assessments is reduced due to some error in the assessment process.
  4. You are a holder of investments that offer you various tax deductions and benefits you haven’t declared yet.
  5. After calculating the taxes you have already paid, in addition to the deductions allowed, the tax amount which is already paid is showing negative.

Requirements:

The requirements for getting approved for a tax refund loan are:

  1. You should be 18+ years old. It is recommended that the borrower be at least 21 years of age/
  2. The borrower should have a monthly income (salary) of $800 at a minimum. It is recommended that the payment monthly be at least $2,000 before taxes.
  3. You must have an active bank account.
  4. You should possess a government-approved ID card.

Pros and cons:

Pros of Tax Refund Loans:

  1. Funds are received in a short period
  2. You can qualify for a loan without a perfect credit score
  3. You can quickly pay off any debts with a high-interest rate
  4. You don’t have to pay any extra money apart from the standard costs because tax refund loans have a 0% APR policy.

Cons of Tax Refund Loans:

  1. You have to pay interest fees and rates
  2. Tax refund loans are not readily available all the time.
  3. There are caches that you may receive less money than you thought you would get.

Summary

If you have been diligently paying your taxes to the government, you have a better chance of getting approved for a tax refund loan. Or better yet, if you have been paying more tax than the actual tax liability you are supposed to pay to the government, you will surely be approved for a tax refund. At the end of the financial year, if the borrower of the money has paid the self-assessment tax and the advance tax, or if the deduction rate of TDS deducted is a higher amount compared to the borrower’s actual tax liability.

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