Tax refund loans: Risks and benefits explained |
tax refund loans

Tax refund loans: Too good to be true?

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These loans promise a faster return on your taxes at 0% interest and no fees — but are they actually free?

Sometimes tax returns make all the difference to your personal finances. But new regulations mean stalled returns for some people — even longer than they’ve experienced already.

That’s where the tax refund loan comes in. If that term stirs up thoughts of predatory lending, that’s because tax refund loans used to be. Today, these loans are another way for tax preparation stores to up their foot traffic.

A tax refund loan might be inexpensive if your tax forms are simple. But most people won’t actually be able to get it for free.

What exactly is a tax refund loan?

A tax refund loan is similar to an advance on your tax refund with 0% interest and no financing fees. These loans are offered by tax preparation services, which use them as a way of bringing in customers to their brick-and-mortar stores. This works because tax refund loans require applying in person to qualify.

It’s a fast form of financing: You can get your money in as little as one day. And there’s no need to make repayments.

Once your federal or state refund comes through, the tax service deducts your loan amount from your refund before sending along your money.

Who’s eligible for a tax refund loan?

Tax refund loan providers pay attention to standard eligibility requirements like your creditworthiness, age and income.

But the two most important factors in qualifying are:

  • Having your taxes prepared in person. You can only get a tax refund loan from the company that’s also doing your taxes.
  • Knowing how much of a refund you’re getting. You can typically find this out when applying through one of these services.

How much does a tax refund loan cost?

Tax refund loans don’t come with interest or financing fees. But that doesn’t necessarily mean they’re cheap.

Here are some of the costs that come with tax refund loans.

Tax preparation fees

While online tax preparation is sometimes free, in-office tax preparation often requires a tax filing fee.

Expect to pay something in the ballpark of $50 to $500 when filing your taxes in a store — though it can go a lot higher. The one exception is for those filing Form 1040EZ, the simplest of tax filings, which sometimes doesn’t require an in-store fee. Call ahead to make sure this option is available to you beforehand.

Is a tax refund loan worth it?

If you’re only expecting a return of $500 or $600, you might want to take advantage of one of the many free tax preparation options and take out a personal loan to cover your personal financial needs.

Think about it this way: You’re likely paying at least $100 in tax preparation fees to get your $500 return two months faster. When you do the math, that means you’re paying about 20% of your refund for the convenience of using your anticipated refund early.

If you’re considering this route, do the math to make sure it’s worth it for your needs.

Not right for you? Four alternatives to consider

Refund anticipation loans

Before a government crackdown in 2012, you might have come across refund anticipation loans. These loans functioned like a tax refund loan but came with high interest rates and fees on top of any tax prep charges.

It’s harder to find anticipation loans today, but they do exist. Look out for lenders charging:

  • Application fees
  • Technology fees
  • E-filing fees

If you think you might be the victim of a predatory lender, file a report with the Consumer Financial Protection Bureau.

Prepaid debit card fees

Some services require you to sign up for a prepaid debit card to receive your refund. These cards often come with fees that can sneak up on you — like withdrawal fees, payment fees and even ATM decline fees. Fees are typically small — $2 or $3 for the most part — but they can add up over time, especially if you’re not aware of them.

You might be able to opt out of the prepaid debit card by asking for a check or having your loan deposited directly into your bank account. You probably won’t get your funds as quickly, however.

Who could benefit from a tax refund loan?

Aside from the 1040EZ tax filers, who often don’t have to pay anything for this service, deciding to take out a tax refund loan is not always an obvious choice.

Anyone who relies on tax refunds to cover basic personal expenses might benefit the most from a tax refund loan — if your expected refund is high enough to make the filing fee worth it.

You might also benefit from a tax refund loan if:

  • You claim an Earned Income Tax Credit or Additional Child Tax Credit. These deductions could mean you’re waiting for more than $6,000 in tax credits that you need to support yourself and your family. But federal regulations require extra scrutiny for EITC and ACTC claims, possibly delaying your tax refunds.
  • You file early. You might be able to get some of your tax refund before the holiday season, a convenience that possibly offsets fees, depending on the service you file with.

Three tax preparation services that offer refund loans

Refund loans haven’t been around that long, and few services provide them. They’re often called “advances,” rather than loans, and are available for a limited time each year.

Jackson Hewitt

Jackson Hewitt offers Express Refund Advances, which are originated by MetaBank. MetaBank may have specific eligibility criteria that borrowers must meet.

Loan amounts $100-$3,200
Types of fees Tax preparation fee, prepaid debit card fees
Average tax in-store preparation cost $230
Eligibility Prepare your taxes with Jackson Hewitt in person and meet MetaBank’s eligibility requirements.
When it’s available $200–$400 available December if you present a pay stub. All other loans available when you file your taxes. Tax refund loans stop being available in early March.
Speed Within 24 hours

H&R Block

H&R Block’s Refund Advance are originated by BOFI bank and may come with additional underwriting criteria that you must meet to qualify.

Loan amounts $500–$1,250
Types of fees Tax preparation fee, prepaid debit card fees
Average tax in-store preparation cost $222
Eligibility Prepare your taxes with H&R Block, eligible for an IRS refund.
When it’s available January 5—February 28
Speed Within 24 hours

Read our review of H&R Block

Liberty Tax®

Liberty Tax® offers Easy Advance tax refund loans through Republic Bank & Trust Company, which might have additional eligibility requirements.

Loan amounts Up to $1,300
Types of fees Tax preparation fee
Average tax in-store preparation cost $233
Eligibility Prepare your taxes in Liberty Tax stores and at participating locations.
When it’s available January 3–February 28
Speed Within 24 hours

Read our review of Liberty Tax®

Imagine this scenario: Nora’s car breaks down one cold January, and she’s not able scrape together the money to cover the repair costs. She knows her family is due a tax refund of around $4,500 after claiming an Earned Income Tax Credit, so she decides to apply for a tax refund loan of $1,000 to cover her car repair costs so that she can get to work.First, she talks with her local Jackson Hewitt, H&R Block and Liberty Tax locations to see how much her filing fees might cost.
Woman on phone in front of car

Considering these extra expenses, she finds that Jackson Hewitt is among the more expensive options:

  • Jackson Hewitt — $230
  • H&R Block — $147
  • Liberty Tax — $191

Next, she calculates the fees against the convenience of seeing her IRS refund early. At best, she’s paying about 15% of her $1,000 advance in fees.

After looking at potential fees, it’s clear to Nora which is least expensive: H&R Block. Knowing her only alternative is a payday loan, Nora chooses to take advantage of the safer tax refund loan, which doesn’t have the potential to result in more debt.

The next day, Nora goes to H&R Block, pays to have her taxes done and applies for an advance. And she’s soon back on the road.

Alternatives to getting an advance on your tax refund

The fees for filing your taxes in person can be expensive. If your refund isn’t big enough to justify the costs, consider using a free online service and opting for one of these financing options instead:

  • A personal loan up to $5,000. If you have one big expense you’re hoping to cover with your tax return, it could be worth it to take out a personal loan for that amount instead. Look for a loan that doesn’t come with prepayment fees so that you can easily pay it off as soon as you get your refund.
  • Your credit card. Use your credit card to cover day-to-day expenses and then apply your refund to pay off as much of your card’s balance as you can. It could be a bit more expensive than a personal loan, but it might be cheaper than a tax refund loan.
  • Short-term loan. Payday loans are more risky. But if you can afford to make payments on time and don’t qualify for another option, a short-term loan that you pay back within a few weeks or months might be a viable option.
  • Direct deposit for refunds. You won’t get your money months in advance, but you can get your tax refund marginally more quickly if you ask for a direct deposit instead of a physical check when filing taxes.

Want a quick cash loan instead? Compare your options

Rates last updated December 17th, 2018
Unfortunately, none of the short term loan providers currently offer loans in your state. Learn more about short term loans in your state to find an alternative.
Name Product Product Description Term of Loan Turnaround Time Max. Loan Amount
CashUSA Installment Loans
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90 days to 72 months
As early as 1 business day
Jora Installment Loans
Installment loans with repayment terms up to 30 months, depending on your state.
4–30 months, varies by state
1–2 days
OppLoans Installment Loans
Installment loans with competitive rates from a top-rated direct lender.
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1 business day
CashNetUSA Loan
Apply for a short-term loan with an easy online application and dedicated customer service.
Varies by state
1 business day
Varies by state
LendYou Short-term Loans
Apply online with this loan-connection service offering unrestricted short-term loans with fast turnaround.
1 business day
Check into Cash Payday Loan
With 1,000 branches in 30 states, get $50 to $1,000 in days from this direct lender.
Varies by state
1–2 business days
ACE Cash Express Short-term Loans
Quick payday, installment and title loans with no prepayment penalty and a 72-hour satisfaction guarantee. Funds can be loaded on an ACE Elite™ Visa® Prepaid Debit Card.
Varies by state
Generally receive the money the next business day
Varies by state

Compare up to 4 providers

Bottom line

If you rely on your tax refund to cover personal expenses, need it to offset the cost of the holidays or have an emergency that you don’t have the funds to pay for, getting a tax refund loan could be a safer alternative to other types of short-term financing.

They might also benefit people who’ve filed for tax credits that are subject to extra scrutiny by the IRS and take extra time to come through.

But tax refund loans aren’t free. If you weren’t planning on having your taxes filed by a professional in-store, you’ll be shelling out an additional $150 to $300 for that service. If you’d like to explore more options for borrowing money this tax season, learn about other offers in our small-dollar loans guide.

Frequently asked questions

Anna Serio

Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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3 Responses

  1. Default Gravatar
    BrianJune 14, 2018

    Whats the best loan to take out against my tax refund coming up. I have $5500 in super tax i payed on receiving 18k compassionate grounds payouts this year… Ive been i formed i shoukd recieve most of it back

    • Default Gravatar
      ArnoldJune 16, 2018

      Hi Brian,

      Thanks for your inquiry

      I’m afraid we are not permitted to recommend a specific brand to our users to maintain fairness among all the brands we feature on our site. It would be best to compare the options above to find the right loan for you. If you need help preparing your tax, you may want to reach out to a tax preparer to handle this on your behalf.

      Hope this information helps


  2. finder Customer Care
    AnnaApril 5, 2018Staff

    Hi Patsy,

    Thanks for reaching out to! Unfortunately your options are very limited if you don’t have income. Are you collecting Social Security, a pension or other government benefits? If so, you might be in luck because some lenders consider those as income.

    If not, you might want to check out auto title loans if you own a car, visit a pawn shop or see if you can qualify for a signature loan. These can all be highly expensive, however, and aren’t a great choice unless you absolutely don’t have any other option.



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