If you need some cash and expect to receive a tax refund, a tax refund advance loan may be something you're considering. Available during tax season, this type of financing allows you to borrow against your estimated tax refund — sometimes, without interest or fees.
CNBC Select breaks down how tax refund loans work, where you can get one, and what to keep in mind before you apply.
What you need to know about tax refund loans
- What is a tax refund advance?
- Where can you get a tax refund loan?
- How does a tax refund advance work?
- What are the pros and cons of a tax refund advance?
- Alternatives to a tax refund advance
- Bottom line
What is a tax refund advance?
When you file your taxes, the government will give you a refund to compensate for any taxes you overpaid during the year. However, you don't instantaneously receive that money — you have to wait until the government sends it.
If you'd rather get your refund cash now, you can turn to a tax refund loan (also known as a refund advance loan). This is a short-term loan you can take against a portion of your estimated tax refund, and it's typically offered by your tax preparation service right after you file. Similar to other loans, the interest and fees for a tax refund loan will vary by provider.
Where can you get a tax refund loan?
You can usually get a tax refund loan if you're filing your taxes with a tax preparation firm. For example, TurboTax offers this service. Depending on your estimated refund amount, you can borrow up to $4,000 with 0% APR and no fees. Note that you'll need to open a checking account with Credit Karma Money™ to receive the funds.
TurboTax
On TurboTax's secure site
Cost
Costs may vary depending on the plan selected - click "Learn More" for details
Free version
TurboTax Free Edition. ~37% of taxpayers qualify. Form 1040 + limited credits only.
Mobile app
Yes
Live support
Available with some pricing and filing options
Click here for TurboTax offer details and disclosures. Terms apply.
H&R Block also provides refund advance loans of up to $3,500 when you e-file a tax return at a participating H&R Block office. Similarly, you won't pay any interest or fees, but you'll need some additional H&R products to receive the funds: either a spending and savings account with the Spruce Mobile Banking app, or the H&R Block Emerald Card®, which is a prepaid debit card.
H&R Block
On H&R Block's secure site
Cost
Costs may vary depending on the plan selected (Free Online, Deluxe, Premium, or Self-Employed) - click "Learn More" for details
Free version
Yes (for simple returns only)
Mobile app
Yes
Live support
Available with some pricing and filing options
Terms apply.
Another tax preparer that advertises tax refund loans is Jackson Hewitt. You may be able to borrow anywhere between $250 and $6,500 — but you'll have to book an appointment at a Jackson Hewitt office to file your taxes. The provider's No Fee Refund Advance loan has 0% APR and charges no fees.
Jackson Hewitt Tax Service
Cost
A flat fee of $25 for online filing
Free version
No
Mobile app
No
Live support
Free live chat support, plus an option to file in an office
Terms apply.
How does a tax refund loan work?
Tax preparers have different terms and guidelines for tax refund loans. Some charge fees and interest, and others can provide this type of financing free of charge.
Usually, you can expect the process to be the following:
- To get a tax refund loan, you'll typically need to file your taxes with the preparer that provides the loan. You might be able to do so online, but some firms will require that you file in person.
- The tax preparer will review your application. Besides your tax return, they may look at your income and credit. Because your tax refund secures these loans, you usually can get approved — but it's not guaranteed.
- Some tax preparers may require that you open a checking account or a prepaid card specifically for the loan.
- If you're approved, you can often get the funds on the same day.
- The loan amount, as well as any additional charges, will be deducted from your tax refund. The provider will deposit the remainder of your tax refund to your account (which may be a checking account or the prepaid card you've opened to apply for the loan).
- If your tax refund ends up being smaller or arrives later than expected, you may end up owing a balance. Ask your provider about the potential terms of repaying it.
What are the pros and cons of a tax refund advance?
A tax refund loan may be a convenient option if you need quick access to cash and expect a tax refund. However, you also want to be aware of potential drawbacks before you apply for the loan.
Advantages of tax refund loans
- Quick access to cash
- No interest or fees with some providers
- Easy to qualify for
Disadvantages of tax refund loans
- Significant interest and fee charges with some lenders
- Potential debt if the tax refund is delayed or insufficient to cover the balance
Alternatives to a tax refund advance
A tax refund loan is far from the only way to get cash when you need it. If you're in a financial emergency and need funds quickly, you can find a personal loan lender that'll get you funded within a day.
LightStream is a good example. You can get a loan of up to $100,000 with same-day funding through ACH or wire transfer. If your credit is in great shape, you can get a comparatively low interest rate. Plus, the lender doesn't charge origination, early payoff or late fees.
LightStream Personal Loans
Annual Percentage Rate (APR)
6.99% - 25.49%* APR with AutoPay
Loan purpose
Debt consolidation, home improvement, auto financing, medical expenses, and others
Loan amounts
$5,000 to $100,000
Terms
24 to 144 months* dependent on loan purpose
Credit needed
Good
Origination fee
None
Early payoff penalty
None
Late fee
None
Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.
If you're planning a big purchase, it may be best to avoid taking on a loan and wait for your tax refund to arrive instead. With a direct deposit, the funds should take around three weeks to hit your account. You can also look into 0% APR credit cards which offer an intro period where you don't pay any interest on purchases. This way, you can spend the money and have plenty of time to pay it back without worrying about APR charges.
For instance, the Wells Fargo Reflect® Card offers a 21-month 0% APR period on purchases and qualifying balance transfers (18.24%, 24.74% or 29.99% variable APR thereafter). For a balance transfer to be eligible for the introductory APR, it must be made within 120 days of account opening. The balance transfer fee is 5% of the amount transferred ($5 minimum). The card also has a $0 annual fee.
Wells Fargo Reflect® Card
On Wells Fargo's secure site
Rewards
None
Welcome bonus
None
Annual fee
$0
Intro APR
0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.
Regular APR
18.24%, 24.74%, or 29.99% Variable APR
Balance transfer fee
5%, min: $5
Foreign transaction fee
3%
Credit needed
Excellent/Good
See rates and fees. Terms apply.
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Bottom line
A tax refund loan can be a convenient way to get cash quickly when you're filing your taxes. It's typically easy to get approval, and you can find a provider that doesn't charge interest or fees. Still, it's wise to evaluate other options before you borrow against the money you don't have on hand yet.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every loan guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.