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Advantages and disadvantages of lending for tax return

Tax reimbursement loans offer a way to gain access to funds due to a tax refund sooner than if you expect the IRS to process reimbursement. In essence, they are short-term loans versus income foreseen by a tax reimbursement.

Whether this type of loan will be appropriate for you or not, will depend on your personal circumstances. While a loan for waiting for tax refunds will undoubtedly give you almost instant access to the money you owe to the government, there are also some disadvantages you should also remember.


The main advantage of a reimbursement loan is that you will have the funds you expect to get from your tax reimbursement available to spend earlier. This type of short term loan is usually processed very quickly and you can have your money in your checking account within a few days. This can be especially helpful if you have urgent bills to pay and you can not expect reimbursement to come through ordinary channels.


The main disadvantage of these types of loans is that you will be charged interest and fees, which may be quite high and this will reduce the amount of money you receive from your reimbursement. It is important when applying for this type of short term loan that you are fully aware of is a loan, it is not, as some ads will lead you to believe, a way to receive tax reimbursement will be processed on quickly.

Another potential disadvantage that consumers need to be aware of this type of loan is that if the tax refund is delayed or the IRS refuses reimbursement, the loan will still be unpaid and will have to be repaid.

When is it appropriate to pay a tax credit?

As with all kinds of loans, the need for a lending tax loan will depend on your circumstances. If you do not need funds urgently, then it would be better to expect reimbursement to be processed in a normal way than it would be to spend money on the payments and interest of a loan.

On the other hand, if you need urgent funds and are ready to get a little less of your reimbursement than you might have expected initially, a tax credit loan will make these funds available to you within a few days.

Shop around

If you decide to apply for a loan pending tax reimbursement, it is better to buy instead of obtaining the first credit you see advertised or the credit offered by your accountant. There are many foreign companies that offer this type of finance and interest rates and fees may vary significantly, so credit compatibility is often the best option because you can get a loan from more than a lender, you can look for the best deal that is available.

It is always important when you agree with any loan, including prepaid tax reimbursement loans, that you read carefully the terms and conditions and understand what the cost of the loan will be and when the loan will have to be repaid.

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