Tax Refund Anticipation Loan - RAL

A loan provided by a third party against a taxpayer's expected refund. The tax refund anticipation loan is not provided by the U.S. Treasury or the IRS and is subject to the interest and fees set by the lender. These loans are most often offered by large tax preparation companies to taxpayers expecting refunds of a few thousands dollars or less.

Refund anticipation loans (RAL) can be very expensive relative to the short-term benefit they provide. The interest may seem small (3-5% of the refund amount), but can be much more when additional fees and charges are considered. Thanks to the increased use of electronic filing and direct deposit, most refunds now only take a few weeks to a month to process. Thus, if a taxpayer is not in immediate need of the funds, it generally makes financial sense to avoid using a tax refund anticipation loan.