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Refund anticipation loan

The short term loan which is being secured by the expected tax refund of the taxpayer is known as the refund anticipation loan or RAL. Refund anticipation loan is available in the loan market so that customers can have an access to the funds in a much quick way. Refund anticipation loan would thus help to save the time for the borrower of the loan rather than waiting for the refund of the tax. Refund anticipation loan are being used by those consumers who fall into the income group of low and moderate wage earners. The companies which specialize in preparing income-tax, markets this kind of refund anticipation loan in an aggressive manner. The customers, who are in need of money very badly, are lured by the advertisements of ‘instant refunds’ or ‘quick cash’ that these companies of income-tax preparation markets about refund anticipation loan. When such kind of marketing is done by the companies of tax-preparation, they only mask out the fact that they sell these types of loans in advance on refunds of anticipated tax.

Refund anticipation loan are being applied by the taxpayers in the United States through the use of a service of a tax preparation for the professionals. In these conditions the borrower is charged of a typical form of fee so that it becomes easy for him to get back the tax. The Internal Revenue Services in the United States restricts the refund anticipation loan to be based on the amount of money which would be there for the purpose of refund that is expected of it. Only for such purposes like that of originating a product of the bank along with the charges for the creation of a bank account which is of short-term that refund anticipation loan charges an extra amount of fee. The extra amount of fee which would be charged by the service should be of equal amount for both types of bank products like that of loan and non-loan bank products. In the year 2004, the extra amount which has been charged was being as average as $32. Finance charges are being charged by those banks through which refund anticipation loan is being charged in the United States.

Estimation has been made in the year 2004 about the actual number of users who used refund anticipation loan. The study has been conducted by the National Consumer Law Center. It revealed that in the year 2004 in the United States as many as 12 million taxpayers have been using refund anticipation loan. Consumers in the United States can look forward to filing for refund anticipation loan through the process of e-filing and partnerships offered by the IRS, all for free. By using this system of e-filing the taxpayers in the United States are being able to obtain their tax refunds within a short period of time as three weeks. In some other cases tax refund of the refund anticipation loan can also be acquired by the tax payers in the United States within a much shorter time as ten to that of fourteen days time, only if they decide to get the refund through the system of direct-deposit. And this is the reason that has made refund anticipation loan to be a less attractive type of loan.

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