Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

IRS tax debt solution: Use a personal loan to pay off taxes

Get the IRS off your back and your taxes on track with a personal loan.

The Internal Revenue Service (IRS) can make even the most brave-hearted among us want to make a break for the hills. So many forms, worksheets and if–then stipulations can make anyone’s head spin — and it’s unsurprising that sometimes things can go wrong.

The IRS can be unforgiving when you owe them back taxes — as are the interest and fees associated with late payments. But you may be able to pay off the IRS all at once with a personal loan and get a little peace of mind.

First, can I use a personal loan to pay my taxes?

You can. In fact, you can use a personal loan for nearly any legitimate purpose, which includes IRS debt. You can typically borrow between $2,000 and $50,000 and take between one and seven years to pay it back.

When applying for a personal loan, you’re generally asked what you plan to use the funds for. Your reason is a factor used by the lender when evaluating your application and could affect your approval as well as your loan’s terms. As you can imagine, paying taxes could be considered more responsible than paying for a vacation.

Should I use a personal loan to pay my taxes?

Ask yourself the following questions to help you decide if a personal loan is the best solution for you.

  • How much do I owe? Personal loans typically come in amounts ranging from $2,000 to $50,000. If you owe more than this, a personal loan might not be able to fully help you with your taxes.
  • What’s my credit score? You’ll typically need to have good to excellent credit to qualify for the most competitive loans. If your credit score is below the mid-600s, you might have a difficult time qualifying for a personal loan at all.
  • Can I afford the monthly payments? Taking out a personal loan you can’t afford to repay can seriously damage your credit — and you likely won’t be able to qualify in the first place.

Compare loans to pay tax bills

1 – 6 of 6
Name Product Filter Values APR Min. credit score Loan amount
Upstart personal loans
Finder Score: 4.2 / 5: ★★★★★
Upstart personal loans
7.80% to 35.99%
$1,000 to $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
SoFi personal loans
Finder Score: 4.4 / 5: ★★★★★
SoFi personal loans
8.99% to 29.99%
$5,000 to $100,000
A highly-rated lender with competitive rates, high loan amounts and no required fees.
Best Egg personal loans
Finder Score: 3.8 / 5: ★★★★★
Best Egg personal loans
8.99% to 35.99%
$2,000 to $50,000
Fast and easy personal loan application process. See options first without affecting your credit score.
Finder Score: 4 / 5: ★★★★★
8.49% to 35.99%
$1,000 to $50,000
Check your rates with this online lender without impacting your credit score.
LendingPoint personal loans
Finder Score: 3.3 / 5: ★★★★★
LendingPoint personal loans
7.99% to 35.99%
$2,000 to $36,500
Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
Happy Money
Finder Score: 3.8 / 5: ★★★★★
Happy Money
11.72% to 24.50%
$5,000 to $40,000
Pay down your debt with a fixed APR and predictable monthly payments.

What happens if I don’t file my taxes on time?

The IRS charges a large penalty if you don’t file your tax return by April 15, 2020 and you owe taxes.

  • Interest: If you don’t file your taxes on time, expect to pay an extra 5% of your unpaid balance for every month you’re late with your return for up to five months.
  • Late penalty: If your taxes are more than 60 days late, you’ll either pay a penalty equal to the amount you owe or $210, whichever is less. The 60-day period starts after any extensions.

What happens if I only pay part of my taxes?

Even if you’re worried about how you’re going to pay your taxes, it’s a good idea to file on time if you want to avoid those hefty penalties. The IRS still charges interest and fees, but not as much:

  • Interest: The IRS charges 0.5% of the tax amount you owe for every month you’re late, up to a maximum of 25%. If you’re on an installment agreement, this drops to 0.25%.

Going months without paying your taxes can have even more drastic consequences, with the IRS garnishing your wages, putting a lien on your property or even seizing your assets to pay them back.

Must read: What is a tax lien?

A tax lien is the government’s claim on your property that’s placed when you fail to pay taxes owed. It doesn’t necessarily mean they’ll seize your property, but rather that the government is first in line to rights to your property over other creditors. When a lien is filed, it will appear on your credit report, making it difficult to get future credit or loans.

Benefits of using a personal loan

The IRS levies both interest and fees when it comes to late payments on taxes. While you’ll pay interest on a personal loan, you may be able to avoid fees.

You can also benefit from a few other features, depending on the lender you go with:

  • Loan term. Personal loan terms vary by lender and how much you borrow, but can range from one to seven years.
  • Loan amount. With some lenders offering high maximums, you may be able to get a loan for more than just paying your taxes. But be wary of taking on unnecessary debt.
  • Fees. Depending on the lender, you may be able to get a loan that doesn’t carry origination or prepayment fees.
  • Unemployment protection programs. Some lenders offer you protection in the event that you lose your job and need to pause repayments.

What to watch out for

Taking on debt isn’t an easy — or fun — choice to make. Here are a few factors you’ll want to be aware of:

  • Interest rates. Compare your options to find the best rate you’re eligible for. Your credit score plays a big part in how much you pay in interest. For most lenders, you’ll need a good to excellent credit score to get the best rates. Once you get a loan, you can save on interest by paying it off early.
  • Hidden costs. Carefully read the terms and conditions for any unadvertised fees or costs. If you’re unsure of the total cost of the loan — or details of how the lender’s broken them down — don’t be shy about asking the provider you’re working with.
  • Affordability. Getting a personal loan when you’re unsure if you can make timely repayments can lead to severe ramifications on your ability to borrow in the future. Defaulting can decrease your credit score for a long time to come.

Where can I get a personal loan?

You can get a personal loan to pay off your taxes from a number of places. These include banks, credit unions, online lenders and peer-to-peer marketplaces.

You might want to look beyond your local bank if you need a loan to pay your taxes. That’s because they’ve been tightening their credit requirements in recent years and are generally only an option if you have good to excellent credit. Even with great credit, bank loans can take a while to process and you might not get approved on time.

Credit unions can also be slow — you’ll have to join before you can even apply for a loan. For the fastest turnaround, you might want to start your search with online lenders and peer-to-peer marketplaces, which also tend to have simpler applications. You can start by using the comparison table on this page.

Compare loans now

How to get a personal loan to pay tax debt

Getting a personal loan to pay taxes can be a straightforward process. Once you know exactly how much you owe, you can compare lenders who offer loans of that amount. If you find a lender on our site that you’re interested in, you can start the process by clicking the Go to site button.

Once you’ve reached the application form on the provider’s website, enter the required information. This might include:

  • Your full name and contact information.
  • Details from your government-issued ID, like your driver’s license or passport.
  • Your Social Security number.
  • Details about your employment, income, debt and expenses.
  • The amount you’re requesting and the reason for borrowing.

Lenders usually won’t require documentation of the amount you owe, but it can be a good idea to keep your tax bill handy in case any specific information is requested.

5 alternative payment options

Not sure a personal loan is right for you? Consider these alternatives to help you pay off your tax bill:

  • Credit card. If your debt is small enough or your credit limit is high enough, you may be able to pay off your debt with a credit card. Keep in mind that interest and fees may be more than those the IRS charges. It could also negatively affect your credit by raising your debt-to-income ratio.
  • IRS installment plan. To apply for an IRS installment plan, you’ll need to first owe under $50,000. You’re required to complete and send Form 9465 and Form 433-F to the IRS. As typical with these forms, each comes with a very detailed — sometimes complicated — instruction sheet for its completion. Terms go up to six years, and combined with penalties, you can expect an interest rate of 8% to 10% per year.
  • Offer in compromise. Depending on your situation, you may qualify for an offer in compromise, which allows you to settle your debt with the IRS for less than you owe. Your living expenses, income, ability to pay and asset equity are taken into account when your eligibility is assessed. The IRS supplies an online prequalification tool to help you determine whether this option is right for your situation.
  • Secured loan. A secured loan uses collateral to keep your interest rate low. If you don’t have the best credit but have something you can use as security, then a secured loan may be helpful when you need to pay your taxes.

Your debt-to-income (DTI) ratio is your total monthly debt payments divided by your total monthly income. For example, if your monthly income is $4,000 and you have $1,000 in monthly debt obligations, your debt-to-income ratio is 25%. You can use our DTI ratio calculator to find out what yours is.

How your DTI ratio affects your ability to borrow

Bottom line

Your situation and the amount you owe to the IRS dictates the repayment method that’s best for you. If you decide a personal loan is right for you, review your lending options to get the best terms and conditions. It’s possible to get out from under the boot of the IRS with a little time and patience.

Frequently asked questions

Can I use a personal loan to pay off a tax lien?

Most likely, yes. If you’ve received a letter from the government claiming your property due to failure to pay taxes, you could get a personal loan to pay the amount you owe. Keep in mind you’ll need to meet the lender’s eligibility criteria, including minimum credit score, debt-to-income ratio and other qualifications.

Will my personal loan monthly payment be fixed?

It can be. If you prefer fixed monthly payments, you’ll need to specifically look for a fixed-rate personal loan.

Can I make early repayments on my personal loan?

For most loans, yes. However, your loan may require a fee for early repayments, depending on the lender you’re working with.

Are there fees associated with an IRS installment agreement?

Yes. A regular installment agreement comes with a fee of up to $225, but the fee could be lower depending on your financial situation and the method of payment you choose.

Are personal loans to pay off taxes tax deductible?

Generally, no. Interest repayments on personal loans typically cannot be deducted on your taxes.

More guides on Finder

  • Loans Like Kashable

    Compare cash advance apps or personal loans as alternatives to allotment loans like Kashable.

  • Loans Like BMG Money

    Compare other loan options or cash advance apps as alternatives to allotment loans like BMG Money.

  • Get a $2,500 loan

    Eligibility requirements and where to look for $2,500 loans.

  • Get a $4,000 loan

    Where to shop for $4,000 loans and the requirements needed to qualify.

  • SoFi competitors: Top sites like SoFi

    Those with good credit can apply for a personal loan in minutes with SoFi’s simple online application. Learn about similar online lenders.

  • Get a $3,000 loan

    Compare lenders that offer $3,000 loans for varying credit situations.

  • Find a loan for $2,000

    Compare lenders that offer $2,000 loans for different credit situations.

  • Get a $1,500 loan

    If you need cash for an emergency or to last you until payday, a $1,500 short-term loan could help — but with potential drawbacks.

  • Get a $1,000 loan

    If you’re in need of $1,000 for an emergency, start a comparison of these bad credit lenders offering quick, unsecured $1,000 loans.

  • Get a $5,000 loan

    Compare lenders that offer $5,000 loans for good, fair and bad credit.

Ask a Question provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

2 Responses

    Default Gravatar
    RoseApril 15, 2018

    Is a personal loan to pay off credit card and IRS taxes considered income by the IRS?

      JoshuaApril 15, 2018Finder

      Hi Rose,

      Thanks for getting in touch with finder.

      A personal loan isn’t considered as an earned income. Thus, it is not subject to tax. However, in case your loan is forgiven by the lender, that’s the time it will be considered as an income and should be taxable.

      You may want to check this page to learn more: What are the tax implications of personal loans?

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!


Go to site