Ask Andy: Refund Anticipation Loans - WMC Action News 5 - Memphis, Tennessee

Ask Andy: Refund Anticipation Loans

By Andy Wise - bio | email | Facebook

MEMPHIS (WMC-TV) - Sounds like a lot of you are in a big hurry to get your income tax refund.

Too much of a hurry.

"Albert" of Bartlett, TN, wanted my take on a REFUND ANTICIPATION LOAN (RAL). Most, if not all, of the "big-box" tax-preparers offer these loans. They do your taxes, calculate an ESTIMATED refund, then issue you a loan in that amount in as little as 30 seconds.

"Which tax companies can or cannot offer me a (reliable) RAL if I choose to do so?" - "Albert" of Bartlett, TN

Short answer, Albert:  NONE of them.

The whole point of refund anticipation loans is -- they are loans! Which means you must pay them back, typically under very tight deadlines and very large interest rates.

A few years ago, I investigated the case of a South Memphis woman who opted to get her $3,275 "rapid refund" through one of these loans. She ended up having to pay back $400 in fees and interest in the next 10 days.

That's a whopping 12 percent in interest.

Other nasty components of RAL's include:



* FINANCING FEES. These are added on top of the interest rate.

Let's use that South Memphis woman as an example.

If she had just e-filed her taxes directly with the IRS -- and waited patiently and responsibly for eight to 10 days -- she would have received her 32-hundred dollar refund in full with no fees or interest.

She would have kept that $400. 

Don't tell me middle to low income folks can't wait 10 days to save $400. That's a no-brainer.

If you just have to have your refund in 30 seconds, the tax-preparer isn't the problem. YOU are the problem.

Instead, e-file directly with the IRS. It's easy, it's free, and you'll get your tax refund in eight to 10 days without any fees or interest. Go to the agency's Free-File service at

If you rather file directly with a person, consider The United Way's Shelby County VITA (Volunteer Income Tax Assistance) sites. You can get a schedule of times and locations by calling 211 or 901-415-2790.

The service is FREE. Bring a copy of last year's return; all your 2010 tax documents, including W-2's, 1099's, last paystub in December, etc.; a photo ID for every adult connected to your returns and Social Security numbers for each person on your return.

Complaints against RAL services or other financial institutions in Tennessee should be forwarded to the Tennessee Department of Financial Institutions in Nashville. The web site is

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