Do you have a financial question? Ask Michelle Singletary
A: A refund anticipation loan ("RAL") is a short-term loan backed by your tax refund. And it's a bad idea because of all the fees involved. The loan lasts only until your refund arrives, which can be in about 10 days with electronic filing and direct deposit.
So what about those fees?
Fees range from $34 to $130. To some, that seems a small price to pay to get their hands on their money faster. But in 2008, 8.4 million taxpayers paid $738 million in RAL fees, plus $68 million more in add-on fees, according to a report by the Consumer Federation of America and the National Consumer Law Center. When RAL-associated fees are converted into an annual percentage rate, it can amount to interest rates of 50% to almost 500%.
With electronic filing, you don't need a RAL. If you file your tax return electronically and request a direct deposit to your personal checking or savings account, you can receive your refund in as few as 10 days.