Yes, it’s true.  This is a very real program.  Up through May, you will see all kinds of advertisements for car dealers, manufactured housing dealers, and even furniture retailers who want to entice buyers to buy from them.  Tax preparers also give tax filers a choice on how they would like their refund back with 24 hours being an option. 

How do they do it?  It’s a little thing called RAL or Refund Anticipation Loans.  There are banks out there that will fund loans using your tax refund as guaranteed payment of the loan.  It sounds like a pretty good deal upfront right?  I’ll let you decide. 

Here’s how they work…

1. Complete Your Taxes:  You decide you want to use your tax refund to buy a new car.  Take all of your tax forms to the dealership and visit with their tax preparer.  He’ll get your paperwork done and offer you a loan against your anticipated tax return.  Don’t worry, all the interest charges and fees will come out of the return itself.  A $3000 loan will cost approximately $65 for 8-10 days.  That works out to over 100% annualized.   
2. Choose Your Loan Terms:  The tax preparer will have some options for you to file.  You can mail in your return (4-8 weeks turn around), you can e-file and wait for a direct deposit (8-10 business days) or you can take a loan (24-48 hours).   
3. Sign Away:  Once you decide on that loan, not only are you paying the interest and fees on the loan, you’re also paying the filing fees and any surcharges associated with the loan.  The banks and the one’s offering the loan are robbing you blind. 

Basically, these types of loans are legal.  There is a lot of controversy around them as studies by consumer advocacy groups have shown them to be High Cost and Predatory in nature.  The average borrower who takes out these loans is lower income and less educated statistically.  

My friends, if you’re in such dire straights to buy that new car or get the new house, wait 10 days and get it.  I do not endorse or recommend this type of borrowing.  As you know by now, I am not a big fan of borrowing in general if you can avoid it.  This is a loan that can be avoided. 

I’m going to repeat it again… 

“The rich rule over the poor, and the borrower is servant to the lender.”  Pr 22:7 

Wise Stewards of their money and God’s wealth will allow for the week to pass and get their tax return deposited to their bank account. 

You say, “What if I don’t have a bank account?”  Well, that’s a whole other conversation friends.  With the world moving to electronic money, you’ll need to open an account somewhere.  You’re overspending for things you can order online for much less.

God Bless You!