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Refund Anticipation Loans (RALs)

A refund anticipation loan (RAL) is a loan that you can receive at the time your tax preparer completes your tax return. The loan usually is in the amount of your anticipated tax refund, less interest and fees. The loan is later paid off when the government sends out your tax refund.

Getting your tax refund money immediately by taking out a RAL may be tempting, but it is also foolish. That is because RALs are very expensive. Such loans have fees commonly ranging from $40 to $100, which translates into annual percentage rates typically of 70% to 500%!

You should resist taking out a RAL and simply have your tax return filed electronically with the refund deposited directly into your bank account. When doing so, most taxpayers will receive their refund in less than 10 days. Be patient. Paying the cost of a RAL is a large price to pay for getting your money only a few days quicker.