If you’re like me, tax season couldn’t come soon enough. You’re either gearing up for a refund or you’re organized and ready to put tax season behind you.
If getting a refund is the reason you’re ready for tax season, then you’ve probably heard of early tax refund anticipation loans. If you’ve been debating whether or not to use an anticipation loan here’s what you need to know.
Note: Our main thought on these loans and products is NO. But we're also not your mother, so at least get educated on what you need to know before you take them on.
Before you read on, make sure you check out our tax refund calendar so you know when you could potentially expect your refund. It might make more sense to wait than to get a loan. Now onto the tax refund anticipation loan stuff.
What Is An Early Tax Refund Anticipation Loan?
An early tax refund anticipation loan is a loan that you get from a tax preparation service instead of waiting for your refund to come. These loans can be given as early as the day your tax return is accepted by the IRS. (Which is about 3 weeks sooner than waiting for the IRS refund.) They normally have tax preparation fees deducted from them and may come with other fees for taking out the loan.
These loans are popular since they can help taxpayers receive their refunds early. Anticipation loans are generally given out by a special debit card, check or direct deposit.
Note: Be very careful when getting a debit card or gift card. If you enter the wrong information or email, your refund can be "lost" and it can be nearly impossible to get your money back.
When your actual tax refund is available, the check will be sent to the tax preparer who gave you the loan, automatically paying your anticipation loan back.
Can You Get A Refund Anticipation Loan With Bad Credit?
Good question and the answer is: it depends. There are some companies who claim to give anticipation loans without a credit check (like Jackson Hewitt, for example) others will require credit checks and some may charge higher fees if you have bad credit.
H&R Block's Tax Refund Advance doesn't require a credit check, and you can get up to $3,500 with 0% interest. Download this coupon here and get $25 off your return in-store when you go. Download here >>
If you’re planning on getting an anticipation loan, your best bet is to simply call and ask the tax prep service provider you plan on going to about the details beforehand.
You can also opt to try for a personal loan. Check out Credible here:
Who Offers Refund Anticipation Loans?
Thanks to refund anticipation loan regulations over the past few years, many of the companies who formerly offered refund anticipation loans no longer do. This is good for consumers, as the expensive loans that preyed on low-income families are now obsolete.
However, there are some companies that do still offer anticipation loans, although they look much differently than the expensive ones of the past.
H&R Block Tax Refund Advance – This is the traditional tax refund advance from H&R Block.
The Tax Refund Advance is available up to $3,500, and is available starting January 4, 2020 in stores. New clients can get $25 off your in-office tax prep by showing this coupon special to College Investor readers. Must use the coupon by July 10, 2020. Download here >>
Here’s what else you need to know about the Tax Refund Advance:
- 0% Interest
- No Fees
- Five loan amounts ($250, $500, $750, $1250, $3,500)
- Same Day Approvals
- Advance is issued on a Emerald Card
Terms and Conditions: Void if sold purchased or transferred, and where prohibited. Valid only at participating U.S. offices. Coupon must be presented prior to completion of initial tax office interview and may not be combined with any other offer, or special promotion or pricing program. Discount valid only for tax prep fees for an original 2019 personal income tax return. Expires 7/10/20. ** A new client is an individual who did not prepare or file their prior-year tax return with H&R Block.
H&R Block Emerald Advance – H&R Block seems to have departed from traditional refund anticipation loans and now offers the Emerald Advance starting as early as November each year.
The Emerald Advance is a line of credit of up to $1,000 issued before the Christmas season and that must be paid back by February 15th the following year. As long as the loan is paid back by Feb. 15 then loan holders may be eligible to keep their line of credit for the entire year.
It’s important to note that the H&R Block Emerald Advance is much riskier than a traditional anticipation loan as it is a line of credit with interest and NOT a one-time loan secured by your tax refund.
Here’s what else you need to know about the Emerald Advance:
- $45 annual fee for opening the account
- 36% APR <<<This is HIGH
- Minimum Monthly Payment of $25 or 4% of Your Balance (Whichever is greater.)
- $7.50 Late Payment Fee
- $20 Returned Payment Fee
Liberty Tax – Liberty Tax offers easy advance loans in the amount of $500 - $1,300 for tax payers who qualify. These loans are secured by your tax refund are available in the form of a check printed in the office, prepaid MasterCard or direct deposit.
Check out our full Liberty Tax Review here.
These loans are no longer available, but we will update when they may be available this year.
Alternatives To Refund Anticipation Loans
Have you ever thought about simply getting a personal loan? I know this might sound a bit weird, but you might get more money, a better interest, and an all around better deal.
A personal loan can be a great way to pay off high interest credit card debt, consolidate multiple loans, get your car or house fixed, and more. The helpful feature about these loans is that you have a set payback period - versus having to do your taxes and then waiting for the return.
We recommend shopping for a personal loan on Credible. Credible is a comparison site, where you can see what different options you might qualify for online - in just 2 minutes. You can borrow anywhere from $1,000 to $50,000, with APRs as low as 4.99%. That's a great deal (especially when you look at something like Emerald Advance).
What Can You Do To Speed Up Your Tax Refund?
If you insist on getting a tax refund anticipation loan, please perform your due diligence. Go for the fee free loans of up to $1,300 and by all means stay away from the lines of credit and all other loans that charge fees and hefty interest.
If for some reason you can’t get a free anticipation loan, you’re much better off simply waiting for your tax refund to come in. If you want to speed up that tax refund here’s what you should do:
File Early – You can file your taxes as early as Jan. 1st although we estimate that the IRS won’t start accepting returns until Jan. 25, 2021. You can use a tax prep service or file online through one of these places.
Don't Forget About The Delay For EITC and ACTC - If you are filing with the Earned Income Tax Credit or Additional Child Tax Credit, your return will automatically be held until February 15 to be processed, so you likely won't even get your return until late February or early March.
Have All of Your Information Together – Before you file make sure you have everything that you need. Impatience could cause an error on your part and delay your tax refund. Here’s a list of items you’ll need to file.
File Electronically – Filing electronically is much quicker than filing a paper return and should result in a faster refund. Remember, if you file by mail, you have to mail in your return (takes about a week), and the IRS has to manually put it into the system (adds about 3-4 weeks). Filing by mail typically adds 12 weeks to your original 21 days if you e-file.
Use Direct Deposit – Using direct deposit is the quickest way to receive your tax refund. If you opt for a check, you're only adding time to get your refund. The IRS has to send your information to the check printers, and then they mail it to you. That process adds at least a week to your refund.
Tax refunds are typically given received within 21 days of your tax return being accepted which means you could receive your refund via direct deposit as early as February 20. Although due to a new tax law you might not see your refund until a few weeks after that date.
If at all possible, wait for your tax refund to come in from the IRS. If you absolutely need to your refund early, opt for a fee-free loan and stay away from the lines of credit.
Do you use an anticipation loan? If so who do you prefer to deal with?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.