You may be seeing advertisements for refund anticipation loans as tax season is fast approaching. Refund anticipation loans, also known as tax refund loans or refund advance loans, are a type of secured debt.
A lender, usually a tax preparer, will advance you on your tax refund up to $3,000 The tax preparer will then pay back the loan (principal, interest, and fees) once the refund has arrived at their office. You will then receive the remaining refund. These are just a few of the benefits and drawbacks of taking out a tax refund loan.

Here's everything you need to know about tax refund advancements.

Pro: They can be a great way to pay off high-interest debt

Do you have high-interest credit card debt? A tax-free, interest-free loan can help you get rid of high-interest credit card debt. The majority of tax refunds are received within six to eight weeks. Therefore, the loan will only help you save a few months of interest. However, if you can get the loan now to pay off your debt and prevent it from coming back in the future, it is a great decision.

H&R Block offers interest free loans through their Tax Refund Advance program. This program provides a loan at 0% interest for up to $3500 This loan must be obtained in-store by a tax professional. They do offer same-day loans, however. If you are approved, you will receive a text or an email with the amount of your tax refund advance loan.

You can immediately access your money as soon as you receive that text - funds will be available to you on your H&R Block Emerald Mastercard Prepaid Mastercard!

Pro: To Qualify, You Do Not Need to Have Great Credit

People with poor credit ratings or limited credit histories often have difficulty getting loans. Tax refund loans are secured by the refund you receive from the IRS. To be eligible for the loan, you don’t have to have good credit.

A tax refund loan is a great way for quick money. However, check the timeline as different companies offer loans at different times. You may be eligible for a zero-percent interest loan that you can use to pay your payday loans and credit card debt. Even if you aren't eligible for a zero percent interest credit card.

H&R Block's tax refund advance can provide a 0% loan at no interest.

Con: Traditional Tax Refund Advance loans are high-interest debts

Paying off high-interest debt is only sensible if it is low-interest. Refund advance loans are often subject to origination fees and other fees, which can make them high-interest loans. These loans may be advertised in Cash Advance shops and on neighborhood signs. These "traditional" refund advance loans can be a scam.

The loans are only held for a very short time (less than 2 months) so the real interest rate, also known as the annual percentage rate, could exceed 100%.

You're likely paying an excessive interest rate if you pay any money for a refund loan. Ask a tax professional or lender about interest rates and fees to avoid being taken advantage of.

Remember that you can get your refund as quickly as 21 days if you file electronically, such as through TaxSlayer, TurboTax, or H&R Block.

If you're thinking of using this service, we recommend the H&R Block Tax Refund Advanced. Refund Advance loans are 0% APR. The Refund Advance does not have any fees or finance charges. Start the Refund Advance at a H&R Block near you.

Con: It can be difficult to figure out the details of a loan

Understanding the details of tax refund loans can be difficult due to high interest rates. You may see the interest rate as a fixed fee, rather than a percentage.

The loan's short term makes borrowing expensive. Traditional refund advance loans, where you actually pay to borrow money, aren't the best way to borrow funds.

Con: It is unlikely that you can build your credit.

Lenders will have different reporting requirements for tax refund loans. Most lenders will not report your tax refund loan at the major credit reporting agencies. The loan will not help you build credit.

Learn more about credit building here.

Last Thoughts

It is difficult to get tax refund loans. Before you take out a tax refund loan, there are many terms and rates that you should consider.

Additionally, most people get their tax refunds within 21 days of filing. But remember that tax filing season doesn’t begin until January 31st - see the tax refund calendar. Do you need a loan?

H&R Block's Tax Refund Loan Advance is a great option if you need a loan to pay off your tax debt. You can apply the same day and get 0% interest.

H&R Block Online is also available >>