Andriy Zastrozinov/Getty Images, Illustration: Hunter Newton/Bankrate
Are you expecting a tax refund from the IRS? You may not have to wait for the IRS to process your refund and send you a direct deposit or check in the mail.
If your tax preparation service offers a tax refund loan, you could get an advance with no interest. These loans are easy to apply for and usually don’t even require a credit check. But considering you might have to spend money to access your funds, it might not be wise.
What is a Tax Refund Loan?
Tax refund loans are available to taxpayers who have filed federal income tax returns and are eligible for a refund. These loan products are typically offered in fixed amounts ranging from $200 to $6,000 and are offered in January and late February.
How do tax refund loans work?
When you file your tax return, you can apply for a tax refund loan if your tax preparation service offers it. If approved, the funds will be paid to you by check or loaded onto a prepaid card. The time it takes to get your loan will depend on the lender and how you receive your loan funds.
However, you don’t have to pay it back to the lender or company that provides the loan – instead, it will be deducted from your refund amount before it’s refunded to you.
Where can I get a tax refund loan?
H&R Block
H&R Block Refund Advance loans are offered to customers through Pathward, NA, and can be applied for without impacting your credit score, and you won’t have to pay lender fees or interest.
| Federal tax minimum refund | $250 |
| Tax return preparation fee | File with a tax professional starting at $89 (additional fees for state filing) |
| Early repayment prepayment loan amount | Not applicable |
| Loan amount before repayment | $250, $500, $750, $1,250, $3,500 |
| Time to fundraise | same day |
| deadline | February 29, 2024 |
| Requirements | If you are 18 or older, you can have a tax professional at H&R Block file your tax return electronically. |
Intuit TurboTax
Intuit Turbo Tax Refund Advance is also a no-fee, no-interest loan product offered through First Century Bank to filers who use Turbo Tax.
| Federal tax minimum refund | $500 |
| Tax return preparation fee | Free simplified federal and state tax returns (valid until March 31, 2023) |
| Early repayment prepayment loan amount | Not applicable |
| Loan amount before repayment | $250, $500, $750, $1,000, $1,500, $2,000, $2,500, $3,000, $3,500, $4,000 |
| Time to fundraise | Just 30 seconds after the IRS accepts your electronic file |
| deadline | February 29, 2024 |
| Requirements | You must be 18 years of age or older and not reside in Connecticut, Illinois or North Carolina. You must e-file your federal tax return with TurboTax and report your income on Form W-2, Schedule C, Schedule CEZ or 1099-R. You cannot file on IRS Forms 1040PR, 1040SS, 1040X, 1310, 4852, 4684, 4868, 8862 or 8888. |
Jackson Hewitt
Jackson Hewitt offers two Refund Advance loan products underwritten by Republic Bank: Early Refund Advance loans carry an annual interest rate of 35.53 percent, but Refund Advance loans are also available that allow you to access the loans without paying interest or fees.
| Federal tax minimum refund | $500 |
| Tax return preparation fee | private |
| Early repayment prepayment loan amount | $300, $500, $1,000 |
| Refund prepayment loan amount without fees | $250, $500, $750, $1,000, $1,500, $2,500, $3,500, $4,500, $6,500 |
| Time to fundraise | If you deposit with a prepaid debit card, it may take place within minutes or up to the end of the day. Direct deposits take 1-5 business days. |
| deadline | February 11, 2024 |
| Requirements | You must be 18 years of age or older, e-file your tax return with Jackson Hewitt, and have a good payment history with the IRS and other federal and state government agencies (e.g., Child Support Enforcement, Department of Education, etc.). |
The pros and cons of tax refund loans
It all depends on your financial situation. These loans have their advantages and disadvantages and may be suitable for some people but not others.
Strong Points
Instead of waiting for the IRS, you can get your cash right away.
There are usually no fees or interest charged.
You can handle unexpected financial emergencies.
It can help you pay off high-interest debt, make big-ticket purchases, or use the funds as needed.
Cons
You may be charged interest similar to that of a personal loan.
If you delay paying your money back, you could end up with a lot of debt.
Should I get a tax refund loan?
A tax refund loan makes sense if you need the money right away and the loan is cost-free (i.e., there are no fees or finance charges). It also makes sense to take out a tax refund loan if waiting for money from the IRS would increase your out-of-pocket expenses.
For example, say you have high-interest credit card debt and you can pay it off quickly with a loan, so you don’t have to pay any additional interest while you wait for the IRS to send you your refund.
If you don’t need the money urgently and don’t have any high-interest debt, it may be wise to wait until your tax return arrives.
Tax Refund Loan Alternatives
If you want to explore other options, or if you can’t get a refund but still need cash, the following alternatives may help:
- Online Loans: Use our online lending marketplace to compare personal loan products with competitive interest rates. Fixed personal loans are paid in equal monthly installments over a set period, usually three to five years.
Short-term emergency loans: These loans act as a payday replacement, giving you quick access to cash without paying lots of interest. Some lenders don’t check your credit when you apply, so you might be approved even if your credit score isn’t up to par.
If you need cash now, these online lenders offer fast funding.
| Lender | Loan amount | April | Minimum Credit Score | Time to fundraise |
|---|---|---|---|---|
| Avant | $2,000-$35,000 | 9.95%-35.99% | 580 | As fast as 1 business day |
| Lending Points | $1,000-$36,500 | 7.99%-35.99% | 600 | As fast as 1 business day |
| OneMain Financial | $1,500-20,000 | 18.00%-35.99% | not specified | one day |
| Thrive | $2,000-$50,000 | 8.99%-35.99% | 640 | As fast as 1 business day |
| Upgrade | $1,000-$50,000 | 9.99%-35.99% (for automatic payments) | 600 | one day |
Conclusion
Tax refund loans can be a fee-free solution if you need the money quickly for the short period of time available each year. But if you’re not strapped for cash, you’re better off waiting until you receive your refund from the IRS or looking into other options. Remember, no matter what type of loan you’re considering, it’s important to carefully review all fees and interest charges to make sure you understand the true cost of borrowing.
