Tax Refund Anticipation Loan - RAL


DEFINITION of '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.

BREAKING DOWN 'Tax Refund Anticipation Loan - RAL'

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.

  1. Income Tax

    A tax that governments impose on financial income generated by ...
  2. Tax Anticipation Note - TAN

    A short-term debt security issued by a state or local government ...
  3. Negative Income Tax - NIT

    A guaranteed minimum income plan advocated by economist Milton ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Electronic Filing - E-File

    The process of submitting tax returns over the Internet, using ...
  6. Annualize

    1. To convert a rate of any length into a rate that reflects ...
Related Articles
  1. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  2. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  3. Taxes

    5 Smart Ways To Use Your Tax Return

    This year, find out how to stretch your tax refund further to strengthen your future.
  4. Taxes

    Next Season, File Taxes On Your Own

    Master these fundamentals and you'll be doing your own taxes with minimal stress.
  5. Taxes

    Refund Anticipation Loans Generally A Ripoff

    These short-term loans can provide much-needed cash, but the instant payout comes at a cost.
  6. Taxes

    Personal Income Tax Guide

    If the sight of your W-4 has you in the doldrums, read on to learn how to beat the tax blues.
  7. Taxes

    It's December - Do You Know Where Your IRA Statements Are?

    Don't discard these important documents with your junk mail - they may affect your taxes.
  8. Taxes

    The 5 Countries Without Income Taxes

    Discover information on some of the best countries to consider relocating to that offer the financial benefit of charging no income tax.
  9. Fundamental Analysis

    7 Ways to Create a Tax-Efficient Portfolio

    Taxes may be a necessary evil, but that doesn't mean they can't be reduced. Here's a host of smart moves today's investors can make.
  10. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  1. Why is Panama considered a tax haven?

    The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation ... Read Full Answer >>
  2. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  3. How are variable annuities taxed at death?

    If the owner of a variable annuity dies before receiving full payment, his beneficiary must pay taxes on any earnings received. ... Read Full Answer >>
  4. How do I calculate insurance premium tax?

    In the United States, consumers do not pay any additional tax on health insurance premiums. However, your insurance premiums ... Read Full Answer >>
  5. How can I find tax-exempt mutual funds?

    Tax-exempt mutual funds can be found at many prominent investment firms. Most mutual funds offer a variety of investment ... Read Full Answer >>
  6. Are dividends considered passive or ordinary income?

    Despite the fact that earning dividends requires no active participation on the part of the shareholder, they do not meet ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!