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.

RELATED TERMS
  1. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household ...
  2. Crossover Refunding

    A local government's issuance of new municipal bonds (called ...
  3. Form 843: Claim For Refund And ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  4. Intaxification

    The feeling of satisfaction and joy that a tax refund creates ...
  5. Refund

    A payment from the government for an individual's overpaid taxes. ...
  6. Refundable Credit

    A tax credit that is not limited by the amount of an individual's ...
Related Articles
  1. Taxes

    IRS Refund Lost? Here's What to Do

    Don't panic. There are a number of reasons your refund might be delayed – and solutions for each.
  2. Budgeting

    9 Ways To Use A Tax Refund

    How do you plan to spend your refund this year? We provide some smart suggestions.
  3. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.
  4. Budgeting

    Uncle Sam's Ingratitude

    How do you plan to spend your refund this year? We provide some smart suggestions.
  5. Taxes

    12 Reasons Your IRS Refund Was Late

    A tax refund can be a nice post-tax reward, but if it's taking too long to arrive, here are the most likely reasons for the hold-up and how to check on it.
  6. Taxes

    6 Tax Myths Everyone Should Know

    There are many tax myths that have grown out of general tax confusion. Learning about them can help you avoid costly mistakes.
  7. Budgeting

    10. I always get a raise/bonus/tax refund.

    Putting 10 budget myths in their place
  8. Taxes

    5 Smart Uses For Your Tax Refund

    Consider using the bulk of your refund to take care of long-term needs, like saving for retirement or college.
  9. Financial Advisors

    The Best Uses for a Tax Refund

    Time to splurge or squirrel away? The best thing you (or your client) can do with a tax refund.
  10. Investing Basics

    3 Ways to Invest Your Tax Refund

    Investing your tax refund is a smart way to reach your financial goals. But depending on what you want to achieve, investment styles may differ.
RELATED FAQS
  1. How do I get a split tax refund?

    You don't have to receive your tax refund in a lump sum. Learn the options you have for splitting the money the IRS owes ... Read Answer >>
  2. Can the IRS withhold your tax refund?

    Learn about the instances in which the IRS can levy your federal and state income tax refunds, and find out how the levy ... Read Answer >>
  3. What are the benefits of splitting my tax refund?

    If you receive a refund when you file your tax return, there are some convenient options you can take advantage of. Read Answer >>
  4. When should my tax refund arrive?

    Read about how long it takes the IRS to process your income tax return and what factors could delay receiving your tax refund. Read Answer >>
  5. Can the IRS garnish your tax refund?

    Understand whether the IRS can legally garnish a person's tax returns. Learn the priority for garnishing wages for state ... Read Answer >>
  6. Can the IRS audit you after a refund?

    Learn how the U.S. Internal Revenue Service (IRS) can conduct a tax audit even after a taxpayer was issued a tax refund in ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center