f. Borrow From Family or Friends (2)
Finance companies and similar lenders also make unsecured consolidation loans—that is, they may lend you some money without requiring that you pledge any property as a guarantee that you’ll pay. But the interest rate on these loans can be astronomical, often reaching 25% or more. Lenders also charge all kinds of fees—many not disclosed—bringing the effective interest rate closer to 50%.
If you want to take out a consolidation loan, you are better off borrowing from a bank or credit union than a finance company. Many finance companies engage in illegal or borderline collection practices if you default, and are not as willing as banks and credit unions to negotiate if you have trouble paying. Furthermore, loans from finance companies may be viewed negatively by potential creditors who see them in your credit file. They often imply prior debt problems.
- Tax Refund Anticipation Loans
Although getting a tax refund fast is often a good way to get quick cash, you should probably avoid a tax refund anticipation loan. A tax refund anticipation loan is a loan, offered by a private company, for the period of time between the day you file your tax return and the day you get your refund from the IRS. The amount of the loan is equal to the amount of your anticipated refund minus the loan fee (which is often quite high), minus the fee for electronic filing and minus the tax preparation fee. For example, if you expect a tax refund of $500, the company might charge you $75. You will get only $425 of your $500 refund.
It is usually better to be patient and wait for your refund, rather than pay the high fee for a tax refund anticipation loan. In most cases, you can file your return electronically or by fax and get the money quickly. For more information on how to get a refund sooner and for answers to other tax questions, contact the IRS at 800-829-1040 (voice), 800-829-4059 (TDD) or visit its website at www.irs.treas.gov.
Taken From : Credit Repair by Attorneys Robin Leonard and Deanne Loonin
