If you’re thinking ahead to doing your taxes, beware some great offers that are already in the mail. Debra Moore in the Iowa Attorney General’s consumer protection office says there’s little to gain from Refund Anticipation Loans. Also known as R-A-L, it’s a loan against your expected tax refund. When you’re making out your income-tax forms, some tax preparers may suggest you borrow against that refund before you get it. She says a quick look at the reality makes it clear that’s not a good deal. The interest rate on that “loan” will be extremely high, anywhere from forty to 700-percent APR. If you’ve filed electronically, it won’t even save much time since your refund will arrive in seven to ten days. When they say you’ll get a refund-anticipation loan immediately, actually she says, you’ll pay “high interest for a short turnaround.” There’s a new pitch, in which predatory lenders contact you to say they’ll make that kind of loan even before you start to do youtr taxes. They’ll propose a “pay stub” refund-anticipation loan, borrowing money before you know for sure what your refund will be based on what appears to have been withheld from your pay this year. In fact, taking that refund for granted could get you in trouble even bigger than the high interest rate. You may not get the tax refund you expecting, because money’s taken out of your withholding for a school loan, child support or other collection. If you take out a refund-anticipation loan, you could be stuck paying back more than you get as a refund. Moore says it’s a good reason to e-file so you’ll get the refund as fast as possible.
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