The ball at Times Square had barely touched bottom before the ads for tax-refund loans began broadcasting across the country. But getting tax refund money just a few days earlier can cost you.

A refund anticipation loan (RAL) is a short-term consumer loan secured by the borrower’s expected tax refund. Some tax preparers may advertise RALs as “instant refunds.” This is both misleading and illegal, said Brenda Procter, personal financial planning specialist for University of Missouri Extension.

Consumers are not getting their tax refund, she said. They’re taking out a high-interest loan.

While you may be tempted to pay the lending fees to get your refund right away, Procter says a little patience can save you a lot of money.

“A lot of taxpayers don’t realize that if they file their income tax electronically and arrange to have their refund deposited directly into a checking account, they will likely have their refund in a week to 10 days anyway,” she says.

Borrowing your own money comes at a steep price. Interest rates for RALs are very high, and there are often other fees as well. Based on data from the National Society of Accountants and the National Consumer Law Center, a $500 RAL could cost $125 once you add up interest, fees and other charges.

These high-priced loans are risky too. If the refund turns out to be less than the loan, the taxpayer will have to pay the difference, Procter said.

Unfortunately, the people most likely to use these types of loans are those who can least afford them, she said. “For folks who really need that money for all kinds of things like paying bills or getting necessities that they haven’t been able to afford, that’s a lot of money.”

Fortunately, there are better options for low-income taxpayers. The Volunteer Income Tax Assistance (VITA) program helps low- and moderate-income taxpayers at no cost. VITA tax preparers will file electronically, so taxpayers will receive their refund quickly — and they get to keep all of it.

For more information about VITA sites, see MU Extension’s Missouri Taxpayer Education Initiative website at