All residents of the United States must report their income and pay taxes to the state. Incomes that the people earn in the US or other countries are subject to taxes. Employers must withhold taxes from their employees. After determining the taxes that each employee must pay and the withholding tax, the employees will receive the difference as a refund.
Taxpayers can get their refund 21 days after they filed their tax returns. However, if one is in dire need, he can apply for a tax refund anticipation loan. Banks and some firms that prepare taxes for companies or individuals extend this type of loan. These tax preparers would sometimes offer the loan interest-free to attract more clients.
Here are some steps to take when applying for a tax refund loan.
Prepare the Requirements
Before applying for a tax refund loan, check the documents that you must submit with your application. You must supply the lender with the name and address of your employer, as well as the contact number. Have a copy of your current and past W-2 form. The W-2 form is also called the Wage and Tax Statement.
The paper contains your total annual income and the amount of withholding tax. Your employer must also submit this to the IRS or the Internal Revenue Service. However, borrowers can apply for a loan as early as December, and lending institutions would approve them without knowing how much your refund would be. If they approve an amount more than your tax refund, you have to pay what you have borrowed.
Some lenders might ask for your pay stubs or estimated income, as well as a driver’s license. You might not need all but it pays to prepare all to prevent delay in your loan approval.
Find Banks and Other Institutions that Offer Tax Refund Loan
Remember that each bank or lending institution has different offers when it comes to your tax refund loan. The difference would be in terms of the maximum amount that you can borrow and the rate of interest, as well as the terms of payment.
Some tax preparers offer tax refund loans without interest and with easy repayment terms to attract more clients while some lenders may extend loans at high interest. Shopping for lending institutions will help you find the most beneficial deals for you.
Fill Out the Application
Nowadays, lending institutions allow applicants to submit the application form online. Make sure to provide all the information that the lender requires.
Advantages of Applying for a Tax Refund Loan
One major advantage of a tax refund loan is that you get to use your excess payment for your tax. Here are the other advantages of applying for this type of loan.
No Need of a Credit Score
When you apply for a tax refund loan, the lenders would not look at your credit score. You are borrowing money that you would receive shortly and the lenders can directly deduct the payment from the amount that you will receive. Some banks and tax preparers partner with the government, assuring them that they can get paid when the Internal Revenue System (IRS) releases a refund.
Quick Approval and Release
Since tax refund loan payments would come from your tax refund, the lenders have the assurance that they could collect payment. Approval is quick and creditors release the funds within the day or the next day of filing.
Once you have applied for a tax refund loan from any tax preparers, you are sure about its approval. Lenders do not have to worry about your capacity to pay back what you borrowed because the tax refund goes to these tax firms. As long as you have submitted your application, your loan will get approval.
How to Use Your Tax Refund Loan?
Many taxpayers wait for their tax refund to arrive while a few who are in dire need may take a loan against their tax refund. Just like other loans, you do not use this to support a luxurious lifestyle. Use your credit for emergencies only. If you are not in dire need, waiting for your tax refund check will save you from worrying about paying back your loan in the future. If the money you borrowed is more than your tax refund, you might find it difficult to make the monthly payments.
Using your tax refund to pay up the amount that you borrowed against it is one best way of avoiding having to pay for your loan long term.
If you are an employee and you have paid your taxes religiously, you can expect a tax refund after filing your taxes. Borrowing against the amount that you expect can help you deal with emergencies that would come your way.Continue Reading