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. Refund

    A payment from the government for an individual's overpaid taxes. ...
  3. Crossover Refunding

    A local government's issuance of new municipal bonds (called ...
  4. Intaxification

    The feeling of satisfaction and joy that a tax refund creates ...
  5. IRS Publication 556: Examination ...

    A document published by the Internal Revenue Service (IRS) that ...
  6. Refunded Bond

    Bonds that have their principle cash amount already held aside ...
Related Articles
  1. Taxes

    6 Cheap Alternatives to a Tax Refund Advance

    Tax-preparation companies offer tax refund advances to get customers in the door and collect fees on other services. Here are 6 cheap alternatives to them.
  2. Taxes

    5 Ways To Receive Your Tax Refund

    Taxpayers in the U.S. can receive their income tax refund in many different forms - checks, debit cards, savings bonds and direct deposits. Find out which one is right for you.
  3. Taxes

    7 Reasons Why You Haven’t Received Your Tax Refund

    The reasons for a delay in getting your tax refund range from incorrect information on your forms to a debt offset. Here are five more, plus remedies.
  4. 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.
  5. Taxes

    The Tax Refund: When It Hurts Your Retirement

    A refund can represent a lost opportunity cost for things you could have done in the past.
  6. Taxes

    5 Ways To Double Your Tax Refund

    Many companies offer incentives that allow you to multiply your tax refund - at a price. Here are five of the more popular promotions this year.
  7. Taxes

    Filing Early? Some Refunds Will Be Delayed to Feb. 15

    Extra data to fight fraud means some people's tax refunds will be held to Feb. 15. See if it affects you.
  8. Taxes

    Top 6 Ways To Increase Your Tax Refund Now

    Planning ahead can generate a larger tax refund down the road - these tips will get you on the right path.
  9. Personal Finance

    Tax Credits That Can Get You a Refund

    Here are a few of the credits that may result in a refund check, even if you owe no taxes this year.
  10. 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.
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. 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 >>
Hot Definitions
  1. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  2. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  4. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  5. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  6. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
Trading Center