If there’s one bright spot of tax season for most of us, it’s this receive tax refund. Although tax season Not officially open yet – we expect to be open by the end of this month – you may want to get your tax refund ASAP Pay off holiday debt Or to fund upcoming travel or expenses.

Some tax software companies advertise tax refund advances, which are short-term loans that allow you to get your tax refund faster. It may seem tempting to get your money now, but most experts don’t recommend applying.

“While tax refund advances may seem attractive during tight financial times, I would only recommend eliminating them if necessary,” said Dana Ronald, president of the Tax Crisis Institute. “They Often have high interest rates and high fees, which increase the overall cost of borrowing.”

If you apply for a tax refund advance loan, you may end up paying upfront or long-term fees. Before applying for a tax advance refund, make sure you understand how it works and what the risks are.

Read more: Child tax credit: Find out if you qualify

What are tax refund advances and how do they work?

A tax refund advance (also called a tax refund anticipation loan) is a short-term loan that provides you with a portion of your expected tax refund weeks or months before your actual tax refund. The premise may seem compelling, especially if you’re still catching up on holiday bills. You can typically borrow $100 to $4,000 by February and prepay your tax refund.

“Tax refund advances are not free money and should be treated with caution,” Ronald said. “It is best to carefully consider all potential risks and alternatives before making a decision.”

You will apply for an advance tax refund on the tax preparation company’s website. You may be asked to provide proof of income, pay stubs or W-2s (if available), and other financial records.

Tax refund advance loans generally don’t have the same credit score requirements as other loans, and the amount you’re approved for may depend on the amount of your expected refund. So even if a service advertises a $3,000 upfront fee and you expect a $3,000 refund, that doesn’t mean you’re eligible for a full refund.

You’ll typically receive your funds within a few business days, sometimes even the same day. If you need to file a tax return with a tax preparation company, the amount owed may be automatically deducted from your refund after your taxes are filed with the IRS. Otherwise, you will need to repay the loan by the agreed maturity date.

How much does a tax refund advance cost?

Having extra funds can help, but paying a high-interest tax refund upfront is usually not the right choice. This type of loan carries higher interest rates, with annual interest rates as high as 35%. For context, the average APR on credit cards hovers around 20%, while the APR on personal loans is around 11.56%.

Some tax preparers won’t charge interest as long as you agree to file with them, but that may mean you end up paying tax filing fees. Even if the loan has a 0% APR, there are other fees you should be aware of. For example, when it comes time to repay a loan, you may incur a fee if you choose to pay it back directly from your refund.

What are the risks of advance tax refund?

There are several reasons why you should be wary of tax refund advances.

“One of the biggest risks is that your tax refund could end up being less than the amount you borrowed,” Ronald said. Since these loans are based on expected refunds, there’s always a chance your refund will be lower than expected. In this case, you will be responsible for paying the entire balance.

Second, even if it advertises a 0% annual interest rate, a prepayment may leave you covered in fees. There may be hidden fees, including a requirement to pay for tax preparation services, which can be expensive. Additionally, some services may charge high interest rates, making this loan type more expensive.

notes: Be wary of payday lenders, who may advertise similar loans during this time of year. The interest rates and fees from these companies tend to be very high. In some states, payday loan interest rates average as high as 400% (yes, you read that right). Personal finance experts recommend avoiding payday loans at all costs.

Where can I get an early tax refund in 2025?

Most large tax preparation companies offer some form of tax refund advance, although terms, conditions, eligibility and amounts vary by company. Here’s a quick look at the products offered by some of the larger tax preparation companies:

• Jackson Hewitt offers two products: Early Money Back Advance (available with just your paycheck and up to 35.96% APR) and No Charge Money Back Advance (0% APR) with no charge at most Jackson Hewitt locations.
• Through February 28, H&R Block is offering 0% APR money-back advance loans up to $4,000.
• If you meet certain eligibility requirements, TurboTax is offering an advance refund of up to $4,000 through February 28 with no loan fees and 0% APR. If you choose to pay off your loan with your federal refund, you may need to pay additional fees.

Alternatives to prepaid tax refunds

If you can, wait until 2025 for your refund to be completed. To get your refund as quickly as possible, the IRS recommends filing online early in the tax filing season and selecting direct deposit delivery.

You can also tap into your emergency savings account and replenish funds when your tax refund arrives. If you’re still trying to build an emergency fund, there are other more affordable options to consider.

If you need a refund faster to pay for unexpected expenses or necessities, consider a personal loan or a 0% APR credit card. Just make sure you can make your monthly payments to minimize interest, late fees, and other penalties.