Predatory Lending Practices: Refund Anticipation Loans
Refund anticipation loans are commonly offered by tax preparation services. With this type of loan, you can get your hands on your tax refund before it is processed with the government. Although this might seem convenient, there are several disadvantages to using a refund anticipation loan. Here are a few things to consider before agreeing to a refund anticipation loan.
Interest Rates
Perhaps the biggest problem that most people have with refund anticipation loans is the interest rates that are charged for them. Since you are only borrowing the money for a short period of time, it may not seem like the interest is that high. However, when you calculate it out over the course of a year, it can be substantial. Some of these loans end up costing as much as a 200 to 300 APR. Therefore, the cost of the loan is usually much greater than any benefits that you receive from it.