NEW YORK - APRIL 15

But let’s think about it. Since it’s time to file your income taxes, you may be thinking about the size of the refund you are entitled to. If you experience a financial setback at this time, it’s only natural to be interested in the possibility of receiving your tax refund money early, right?

Be careful – tax refund loans aren’t as good as they seem

Tax refund loans, also called instant refund loans or refund anticipation loans, seem like a great thing if you need cash right now. But the costs are steep. Origination fees range from $29.95 to $89.95, and electronic filing fees of $40 are also common. All you typically need to apply is a year-end pay stub, proof of employment and identification. Sure, you can receive all or a portion of your tax refund (up to about $5,000) within a couple of days, but why would you want to when payday loans are available without origination or “filing” fees?

According to About.com, “the fees for the average refund of just under $2,000 extrapolate to an annual percentage rate of 222.5 percent. Yet 12 million taxpayers paid over $900 million dollars in fees last year just to get their refunds a little faster.”

People think they need tax refund loans

Have they heard of no fax payday loans? They a much more attractive option. Yet the new trend persists.

In Atlanta Journal-Constitution coverage of this outrageous phenomenon, we see that people are indeed using tax refund loans to cover cash emergencies. Graphic artist Pat Cameron had medical bills to cover, so he went to Jackson Hewitt for a tax refund loan.

“I know they charge so much, but this will get me through the first of the month,” he said.

The IRS doesn’t endorse such programs, but neither do they openly speak out against them. They encourage taxpayers to use free electronic filing services, which directly deposit any refund monies due into a consumer’s checking or savings account in about 10 business days. For those who can show hardship, there are even special programs available. But if even that is not fast enough, faxless payday loans are a much better option than tax refund loans.

Recession drives people to desperate ends

That’s exactly the category tax refund loans fall under: desperation.

Overdue bills, foreclosures, rent and many other ominous signs are threatening the financial well-being of consumers. Numerous big-box tax preparation companies like H & R Block, Jackson Hewitt and others are swooping in with these high fee, high interest loans.

Suzanne Boas, president of the Consumer Credit Counseling Service of Greater Atlanta, is quoted on the matter in the Journal-Constitution

Generally, we don’t think it’s a good idea to pay such an exorbitant rate to get what would be due to you anyway in a couple of weeks.

Consumers, payday loans are a better option!

If you are due a tax refund, you will receive it in a couple of weeks if you are using free electronic filing with direct deposit. Don’t go the route of tax refund loans unless paying exorbitant fees upon fees, plus high interest are OK with you. Logically, it’s not the best choice. If you need quick cash for an emergency and can’t wait until you have your tax refund safely in your bank account, try payday loans. They’re cheaper, fast and quite discreet.

If you need assistance with tax trouble click tax resolution/settlement.