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Why To Stay Away From Rapid Tax Loan Refunds

Your tax refund is money you paid in excess, which is now being returned to you. What is interesting about this refund is that you have actually lent the Federal Government some of your money without interest.

The refund is scheduled to be given every spring. However, there are those who need the money sooner. They cannot wait or don't want to wait until the Federal Government releases the refund. The tax preparation industry has come up with a new product, the Refund Anticipation Loan (RAL) or tax refund loan 2018. The RAL, or commonly as the rapid return, allows you to claim your refund your sooner but with an exorbitant fee, of course.

While Rapid Return might seem to be the solution for those who are in need, there are actually downsides on this.

The fee charged by tax preparers for rapid return is usually pegged at around $100. That is not a small amount of money, if you think about it. Remember that you did not receive interest on this money in the first place.

When you look at Rapid Return on an annual basis, the interest rate (which is disguised as a fee) would amount to 700%. That rate is higher than credit cards and other loans. In this case it may be better to take a loan from a credit card or another method.

What is very unfortunate is that those who opt for the rapid tax refund are those who can least afford them. Majority of those who get rapid refunds are the working poor. You could have bought more for a $100 rather than paying it as a fee.

Most of all the refund is your own money. So you are actually paying a fee to lend you your own money.

When it comes to rapid tax refunds, the tax preparers are not put under too much anxiety if they get paid or not as compared to other loans. The mere fact that they have already determined how much refund you're going to get assures them that they get paid right away. There is actually little or no risk involved for them. Given this, the fee imposed for rapid refund seems to be quite high.

Companies who offer rapid tax refunds point out that they offer convenience and financial solutions to those who need them most. There is nothing wrong with that. There is also no suggestion that rapid refunds are not a good thing. The only thing that this presents is that rapid refunds actually represent a poor value for consumers.

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