Don’t throw part of your tax refund away on loan fees, warns Debra Pankow, North Dakota State University Extension Service family economics specialist.

“Unfortunately, too many people receive substantially less than they are due because they take out expensive loans to get an instant refund,” she says.

Research shows many consumers are unaware that the “quick refund” loans some companies offer come with a high cost. These are known as refund anticipation loans (RALs), which are short-term loans secured by a taxpayer’s expected tax refund.

Usually, RALs last about 10 days, which is about how long receiving a refund from an electronically filed tax return will take. Fees for these short-term loans generally translate into triple-digit annualized interest rates.

Some of those involved in the RAL industry include large national tax preparation firms; finance companies; and fringe financial providers, such as payday lenders, check cashers and rent-to-own stores.

If you really need your tax refund money immediately and can't wait for your refund check, you have several less expensive alternatives.

“Other options for quick cash include short-term loans from family or friends, credit union loans and credit card cash advances,” Pankow says. “If you e-file your return, you should have your money in two weeks or less. If you file a paper return, use the direct-deposit option to your bank account. The turn-around time using this option often is less than a month.”

NDSU Agriculture Communication