How does it differ from payday loans?

Both payday loans and income tax refund anticipation loans are short term cash loans designed to offer you, the customer, faster access to cash. Both loans allow you access to money immediately in cases of an emergency, medical bills, credit card payments, unexpected home or car repairs.

A payday loan is repayable at your next payday. You may have to write a post-dated check for the lender. This is dated sometime in the future when you are expected to receive your next paycheck. This may be used as security or collateral for this loan. Sometimes, nothing is required as a collateral for a payday loan.

Income tax refund anticipation loan is repaid to the lender when the borrower’s income tax refund is received. This may occur weeks or months in the future. It uses the taxpayer’s expected tax refund as security. This loan is usually paid through a professional tax preparation service. Additional fees, such as bank product service fee, interest charges and bank finance charges, are incurred. An income tax refund anticipation loan allows the consumer access to his tax refund while he waits for the IRS to process his income tax return.

If you are unable to fully repay your payday loan, depending on your lender, you may be able allowed to have an extended repayment plan, where you can pay off a smaller amount of your loan over a longer period. With an income tax refund anticipation loan, there is no such extended repayment plan. Once your income tax refund comes through, your lender will immediately bank this amount as a once-off repayment.