Tax Refund Anticipation Loan

A tax refund anticipation loan refers to a high interest rate short term loan secured by a tax payer's expected tax refund. The tax payer also applies for the loan through a paid tax preparation firm like H& R block. The firm that prepares tax receives a fee for each loan originated. But according to IRS rules prohibits basing the fee on the amount of the expected refund. Only the banks through which the loan is made are allowed to charge interest or other financial charges. With the e-filing facility , tax refunds can be now directly deposited into the bank account of the taxpayer within two weeks .

There are controversies in Refund Application Loans (RAL) also in spite of its commonplace nature. Its supporters say that these loans allow the access of funds to the people incase of emergencies such as overdue bills, credit payments etc On the other hand opponents like National Consumer Law Center believe that the profit motive of lenders only result in Refund Application Loans being issued often .

More Glossary Terms Explained here