In our current “now” society, even waiting for a tax refund is often considered too long resulting in many families applying for tax refund loans. But is this your best option?
If you are applying for a mortgage or any other loan in the near future, read on to fully understand how this process may impact you.
Did you know that if you claim an “earned income credit” or an “additional child tax credit,” the IRS can delay your refund? No, they are not doing this to be difficult, but rather to combat tax-refund fraud. Your refund is delayed until they have time to check you out to be sure it is in fact you who is filing for this refund.
This delay is one of the reasons that tax preparation companies offer tax-refund advances, so you don’t have to wait weeks to get your refund.
But here’s the thing, it is not an “advance.” It’s a loan from a bank and they have the right to check your credit and report the loan on your credit report, both of which may impact your credit scores if you are in the process of trying to qualify for a mortgage. And, just like any other loan application, if you read the fine print, you’ll see that your “loan” is subject to underwriting requirements, meaning that should you apply for this tax refund advance, there is no guarantee that you’ll be approved.
Although the interest rate is typically zero for this tax-advance loan, you will be charged a “processing fee,” typically ranging between $40 to $60, for the privilege of obtaining your refund upfront. Combined with the processing fee, there is typically a limit to the amount you’ll be advanced.
According to H&R Block, the tax-advance approval rate is only about 75%!
If you take the standard deductions, don’t pay for someone to prepare your taxes!
If you can wait a few more weeks, don’t apply for a tax refund loan!