Saturday, January 10th, 2009

Do the places like 'Instant Tax Services' check your credit to give the loans they are offering?

I seen on TV that 'Instant Tax Services' are offering loans with your last pay-stub of ' 08 and they don't go by your credit score.Could this be true? Do they have you sign some kind of form stating you will pay them back from your taxes and they will be doing them.Is that how it works?

They charge you a fee plus interest, usually.

For instance, you see them on Jan 12th and they "calculate" that you will get $1000 back on your tax return on Feb 1st. They charge you $50 plus 10% of that return to loan you that estimated amount early. On Jan 12th they loan you $850.00 which is $1000 minus $50 for their fee and another $100 which is 10% of your total estimated return: $100.

Those are totally round numbers and a basic scenario. It's usually much more complicated than that, with more fees if your return comes in under their estimate and more fees on top of that if you don't get your return on the estimated time.

Basically, it ends up costing you a lot more that if you wait until you actually file. A LOT more.

If you are okay with that, go for it. But it's very similar to a payday loan – you end up loosing a lot of money and would be much better off if you just waited.

This entry was posted on Saturday, January 10th, 2009 at 2:51 pm and is filed under Credit Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “Do the places like 'Instant Tax Services' check your credit to give the loans they are offering?”

viajero_intergalactico Says:
January 10th, 2009 at 8:15 pm

if they don't they are setting themselves up for big losses.
References :

Chris Says:
January 10th, 2009 at 8:42 pm

They charge you a fee plus interest, usually.

For instance, you see them on Jan 12th and they "calculate" that you will get $1000 back on your tax return on Feb 1st. They charge you $50 plus 10% of that return to loan you that estimated amount early. On Jan 12th they loan you $850.00 which is $1000 minus $50 for their fee and another $100 which is 10% of your total estimated return: $100.

Those are totally round numbers and a basic scenario. It's usually much more complicated than that, with more fees if your return comes in under their estimate and more fees on top of that if you don't get your return on the estimated time.

Basically, it ends up costing you a lot more that if you wait until you actually file. A LOT more.

If you are okay with that, go for it. But it's very similar to a payday loan – you end up loosing a lot of money and would be much better off if you just waited.
References :

taximomuv3 Says:
January 10th, 2009 at 9:29 pm

What they do is figure out your taxes based on your last check stub of the year, which has your earnings & withholdings for the year (provided you only have one job…) You sign a power of attorney type form & they then turn in your taxes on your behalf and are essentially the "middleman" between you and the IRS. The IRS pays them, and then they pay you what's left after what they loaned you minus the fees, etc. when the refund comes in. Of course if the IRS finds errors, or your refund isn't as big as it was calculated out to be, then you will owe the "instant tax service" money. I'm sure they must check your credit – they want to be sure that you're not a deadbeat just in case the above happens.
References :

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