Refund Anticipation Loan (RAL)
When a taxpayer needs the tax refund money fast, he or she can apply for a tax Refund Anticipation Loan. Tax Refund Anticipation Loan is also referred to as RAL or rapid refund. Tax Refund Anticipation Loans are loans from certain banks that have agreements with tax preparation firms such as H&R Block, Jackson Hewitt or Liberty Tax Service for them to initiate the loans whenever the taxpayers want money faster than the amount of time it takes for the IRS to deposit the tax refunds in their accounts or cut the tax refund checks.
Tax Refund Anticipation Loans are just like any other secured short term loans. The bank that offers the tax Refund Anticipation loan will evaluate if it wants to lend to the taxpayer. If the bank wants to lend, then the taxpayer's RAL application will be accepted and approved. If the bank deems the taxpayer is too risky to lend to, then the taxpayer's RAL application will be rejected in the same way a mortgage application or any loan application would be.
What is a tax Refund Anticipation Loan (RAL)?
The Tax Anticipation Loan or RAL is a short term loan secured by the expected tax refund from the IRS.
What is the typical interest rate on the tax Refund Anticipation Loan (RAL)?
Refund Anticipation Loans (RALs) have very high interest rates, much higher than credit card interest rates. Some RALs interest rates can be as high as 100%. There are also fees associated with getting the tax Refund Anticipation Loans.
If the Tax Refund Anticipation Loan a good idea?
While the Tax Refund Anticipation Loan may provide the taxpayer with a faster solution to cash, the Tax Refund Anticipation Loan is like any ordinary short term loan in the fact that there are fees and the interest rates are very high. In most cases, even if the taxpayer is not approved for a RAL loan, he or she will still have to pay for the bank fees for the RAL loan initiation and processing. There are also complaints that the rapid refund loans or RALs that are supposed to take 24-48 hours to put money in the taxpayer's pocket do not live up to their advertisement.