Many taxpayers anxiously await their tax refund every year, using the money for everything from a yearly indulgence to paying monthly bills. When tax refunds are delayed, as they have been in recent years, some taxpayers are in such desperate need that they’ll turn to a kind of last resort: tax refund loans.
Originally labeled Refund Anticipation Loans (RALs), these somewhat shady financial products were offered by banks and tax preparers to provide cash based on the anticipated refund, at very little risk to the lender.
But even with little risk, these loans featured hidden fees and astronomical interest rates. Although suits have been filed against some of these providers to protect consumers, new options have been created, such as ‘refund anticipation checks,’ and the costs are just as high.
One often overlooked alternative to a tax refund loan is to consider using your portable luxury assets to secure a collateral loan from Diamond Estate Jewelry Buyers. An old piece of designer jewelry or a luxury wristwatch can be used to obtain a cash loan, often at a fraction of what many tax refund loans ultimately cost.
There are also other ways to avoid tax refund loans, and in the following article, we’ll highlight a few options.
Avoid Tax Refund Loans by Electronic Filing
In recent years the IRS has incentivized e-filing by offering tax refunds much more quickly for e-filers than for those who file a paper return. Paper filers can expect to wait up to eight weeks for their refunds, whereas e-filers can expect checks in their mailboxes in half that time or less.
The Free File program is the result of a partnership between the IRS and tax preparation software companies. The program offers free online tax preparation and e-filing for taxpayers with an adjusted gross income of $60,000 or less. If your income exceeds this level, you can e-file using the Free File Fillable Tax Forms. While not a tax preparation software program, these blank forms do allow you to enter your tax information and file electronically, and it will speed up your refund check dramatically.
Avoid Refund Anticipation Loans with Direct Deposit
If you opt for direct deposit for your tax refund, you’ll get your money even faster. Direct deposit is simply a way for the IRS to electronically transfer your refund directly to your bank account. You’ll need to provide the IRS with your account information on your tax form, including your account number and a routing number.
Even if you file a paper return, you’ll still get your money more quickly, and it’s an added protection against the possibility of a lost or stolen refund check that is sent in the mail. Taxpayers who combine e-filing with direct deposit get their refunds the fastest, often in as few as 10 days, making the need for tax refund loans nearly obsolete.
Avoid Tax Refund Loans With Credit Cards
If you still need to obtain cash faster than the IRS can directly deposit your refund, you could consider using a cash advance on your credit card. While typically not a great solution for a short term cash need, cash advances on credit cards can be cheaper in the long run than using a tax refund loan.
However, interest rates can be quite high for these advances, often above 30%, and you should check the fine print carefully and compare the total costs. Also, make sure you pay that cash advance back as soon as you get your refund to avoid the possibility of having to borrow more money to pay the credit card company.
Avoid Refund Anticipation Loans – Friends and Family
Another option for obtaining cash until your refund check arrives is to consider borrowing from a family member or friend. While there is some truth to Shakespeare’s line, “Neither a borrower nor a lender be,/ For loan oft loses both itself and friend,” sometimes a friend or family member is the best source for a short term loan.
You need to be careful whom you ask, and treat this kind of loan as you would with any from a bank. Get the terms of the loan on paper, including the amount of the loan and a schedule for repayment–the loan should be paid in full as soon as your refund check arrives.
Avoid Tax Refund Loans With a Store Credit Card
If you plan to use your tax refund for the purchase of an appliance or perhaps for some home improvement project, consider applying for a store credit card instead of a tax refund loan. Many big chain retailers offer their own credit cards for financing larger purchases. The rates on these cards are comparable to most big name credit cards, and definitely better than tax refund loan rates. Often these store cards are offered with free financing for the first three to six months, giving you plenty of time to receive your tax refund and pay the balance in full, avoiding any interest payment at all.
However, if you would like a quick personal loan by using your diamond jewelry or valuable watch as collateral, contact Diamond Estate Jewelry Buyers’ loan specialists today. Our loans are completely confidential. We never conduct credit checks or file reports to credit rating agencies.