The Americans for Fairness in Lending states that every year there are around 9 million refund application loans. These loans cost taxpayers at least a billion dollars every year. Hardship populations are targeted by tax preparers, which control the loans and set very high interest fees. That is why these loans are considered as a predatory lending.
1. The risk
Refund Anticipation Loan is cash advance that falls into short term category. It is set against the anticipated income tax refund of a taxpayer. This predatory lending mechanism charges an average of more than 500 percent for the annual percentage rate. Even big and well known chain tax preparers like HR Block and Jackson Hewitt still charge high Annual Percentage Rates. The average rates for these big tax preparers are between 83 percent and 148 percent of the anticipated income tax refund.
2. Take the Total Amount of Money
Within 10-12 days, the total amount of the average income tax return can be deposited into a taxpayer’s account. However, most of the Refund Anticipation Loans can be issued in just a few days before the total amount of the refund is accepted by a taxpayer. It is wise for a taxpayer to wait for 10-12 days patiently so that he or she can get the full amount of the tax refund.
3. Ask for Clear Explanation
A taxpayer always has the right and obligation to ask some necessary questions to the tax preparers. Even if he or she will hire big tax preparers like Jason Hewitt, HR Block and the like, a taxpayer can request a clear explanation about the amount of money that he or she going to receive from the income tax refund as well as the money he or she has to pay to repay the loan.