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

Ask Andy: Refund Anticipation Loans

Updated:
MEMPHIS, TN -

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:

* Huge BANK FEES

* PREPARATION FEES

* 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 http://www.irs.gov/efile/index.html.

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 http://state.tn.us/tdfi/.

Copyright 2010 WMC-TV. All rights reserved.

  • Most Popular StoriesMost Popular StoriesMore>>

  • Teen killed in crash after prom

    Teen killed in crash after prom

    Saturday, April 19 2014 3:47 PM EDT2014-04-19 19:47:48 GMT
    (WMC-TV) - A young man's life was taken too soon. It was supposed to be a high school memory of a lifetime for Andrew Archer, but prom night turned into a tragic night for his family and friends. His promMore >>
    It was supposed to be a high school memory of a lifetime for Andrew Archer, but prom night turned into a tragic night for his family and friends.More >>
  • Woman featured on News Channel 11's Most Wanted list captured

    Woman featured on News Channel 11's Most Wanted list captured

    Tuesday, March 4 2014 12:51 PM EST2014-03-04 17:51:53 GMT
    Rebecca SpearsRebecca Spears
    A woman wanted for a failure to appear in court charge, was captured Monday.Rebecca Spears was listed as wanted by authorities for failing to appear in court on charges of driving on a suspended license and not having insurance.More >>
    A woman wanted for a failure to appear in court charge, was captured Monday.Rebecca Spears was listed as wanted by authorities for failing to appear in court on charges of driving on a suspended license and not having insurance.More >>
  • 7-year-old girl writes book after mother's death

    7-year-old girl writes book after mother's death

    Friday, April 18 2014 8:31 AM EDT2014-04-18 12:31:56 GMT
    (WMC-TV) - Most 7-year-old girls are playing dress up and reading books, but one Mid-South girl is the exception—not just reading but writing books. Shiloh Sanders talked about the inspiration behind herMore >>
    Most 7-year-old girls are playing dress up and reading books, but one Mid-South girl is the exception—not just reading but writing books.More >>
Powered by WorldNow