Banks Tighten Access to Credit -Here's an Alternative

Banks Tighten Access to Credit -Here's an Alternative

As if credit markets weren't already tight enough, a new 2010 IRS ruling means that many banks are pulling back from funding the loans that almost ten million consumers have come to rely on each tax season. Refund Anticipation Loans (RALs) are a loan products that consumers use based on their anticipated refund amounts. These loans are usually arranged through tax preparers and then granted and funded by banks who partner with them to market the loans to consumers. The consumer pays the fees for the loan, the price of tax preparation, and the loan amount out of their tax refund, meaning they get access to their cash --usually with no out of pocket costs.

As the time it takes to process a refund lessens, the IRS has moved to make RALs less common by no longer reporting the "debt indicator". This indicator had given banks a greater understanding of the amount of a taxpayer's refund that might be eaten up by outstanding payments such as traffic tickets or child support payments. Without this knowledge, banks are less likely to move forward with what, in essence, becomes a high risk loan. The result? Fewer overall loans are granted and consumers have less of a choice in how they receive their funds.

The good news is that there alternatives to RAL loans that consumers still have the right to choose from. Payday loans can offer some of the same benefits of an RAL. Easy application and approval process combined, on approval, with funds deposited in as little as 24 hours make a payday loan a great option for consumers who may fear being or have already been turned down for a refund anticipation loan this tax year.

Payday lenders differ in their requirements, but a good rule of thumb is to have three things ready:

proof of U.S. citizenship and having reached the age of 18

proof of a job with a steady income

an active bank account that is able to receive direct deposits

Easy repayment of the loan is another great benefit to using a payday loan. At the agreed date, your loan amount in addition to any interest and fees will be deducted from your bank account by the lender. You won't ever have to worry about missing a payment or driving to the loan store to drop one off. You should be sure to set aside the proper amount from your refund to pay back what you have borrowed including your fees and interest.

With new and fresh choices, taxpayers seeking to get access to their refund cash early have little to worry about.

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