April 15th is only six weeks away, which means that tax season is in full swing. As you prepare and file your returns, the idea of a refund check can burn a hole in your pocket before you even receive it. Some businesses offer what they describe as a solution to your spending needs by providing tax refund loans, also known as refund anticipation loans (RALs). RALs allow you to receive cash for your anticipated refund. Almost sounds too good to be true? It may be.
The Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) and Department of Revenue (DOR) have issued a consumer warning advising taxpayers to steer clear of these loans. RAL’s are secured by and repaid from your pending federal tax refund and can be risky because it must be repaid even if the taxpayer’s refund is denied, is less than expected, or is frozen. If the taxpayer cannot pay back the RAL, the lender may send the account to a debt collector. And because the loans are short term, borrowers may not realize that the effective annualized interest rates can range from 40% to 700%.
For more information, view the advisory on the OCABR website.
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