Tax Dangers: Avoid Loans for Quick Refund
Tax refund loans are popular in today's society because people love the promise of quick money. Tax time, though dreaded by a majority of the population because it requires them to prepare tax returns, is also a source of happiness, as well, because people receive those long awaited tax refunds. However, despite the fact that most people have been "waiting" for their refunds all of the year, many of them cannot seem to wait a few more weeks and demand immediate tax refunds as soon as their returns are completed. Although this may seem very tempting, there are strong warnings against this practice.
Dangers of Tax Refund Loans
Tax refund loans are common because people always seem to be in need of more money than they currently have at their disposal. This situation happens year round, probably, but at other times of the year people have no solution to deal with their money needs. Tax time is different, however, because people need the money now and see that it will be here in the near future. As a result, many people see no harm in getting tax refund loans for the quick cash they need now and then paying back the loan as soon as the tax refund arrives.
However, tax refund loans are not always as easy or harmless as people perceive them to be. The first problem is that they are still loans and because of Americans' normal spending habits, people generally have a hard time repaying loans because they tend to continually overspend and never have enough money. This means that although someone could take out a tax refund loan intending to pay it back when the refund arrives, by that time he or she may have other financial obligations, as well, and use the refund for something other than paying back the loan. This action would be problematic not only because it extends the time the loan is held but also because of the excessively high interest rates on tax refund loans.
What many people do not realize about tax refund loans is that there is a very high cost involved with this "immediate" money. The interest rates can get as high as 180% or more, so even a loan that is repaid in a few weeks can still accumulate quite a bit of interest. Although the details of the loan are sure to be included in the loan contract, many people fail to read the fine print and have no idea that the loan is costing them that much. In some cases, it can actually cost more to take out a tax refund loan that the refund is worth.
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