Should I Take Out a Personal Loan to Pay Taxes?

Anticipating a tax refund can be one of the greatest financial highlights of the year. Whether you plan to go on vacation, complete a home project, or simply save for a rainy day, your tax return can often give you a bump toward achieving your financial goals. 

So, imagine your surprise when you complete your yearly taxes and find that you actually owe money to Uncle Sam. Those refund dreams quickly dissipate, and panic starts to set in: how are you going to pay for this unwelcome expense? 

While owing money for your taxes is never ideal, it doesn’t have to be a stressful experience. If any of the following apply to you, a personal loan may be your best option depending on how much you owe:

You Don’t Want to Charge Your Credit Card

If you owe a sizable amount in taxes—greater than your current available credit balance or just more than you feel comfortable charging to your card—using a personal loan to cover your debt instead can be a useful alternative. 

Even if you would feel comfortable charging your tax bill to your credit card, you should also consider the higher interest rates that apply to most credit cards—typically twice those of the average personal loan! The longer it takes to pay off the balance on your credit card, the more interest charges will accrue on top of the original tax debt you owed in the first place. 

You Want to Avoid Interest and Penalties

Once you file your taxes and it’s been officially noted that you owe the IRS money, the repayment clock starts ticking. If you don’t pay your tax balance in full by the specified deadline, the IRS can start to charge a failure-to-pay penalty, plus added interest on the outstanding amount. 

Failure-to-pay penalties start around 0.5% of your total taxes due and continue to rise each month your bill is late. Failure to pay your federal debt can also result in the garnishment of your wages, which is never a situation you want to find yourself in. 

Using a personal loan to pay your taxes can help you avoid potential IRS charges or penalties by providing you with the immediate financial resources to pay your tax debt in full.

You Want Peace of Mind

Of course no one wants to owe money—especially when you owe that money to the federal government. Not having the financial means to pay your taxes, along with the uncertainty of what could happen if you don’t pay, can quickly create feelings of extreme stress and anxiety. 

This is where using a personal loan can provide immediate relief. When you enter into a personal loan agreement, you can establish a fixed interest rate and repayment schedule upfront. Although you’ll still have a debt to pay off, by essentially moving your debt with the IRS to a preferred lender instead, you can relax knowing that you are in control. 

If the IRS is now on your list of must-pay expenses, let Credit Direct help! We offer personal loans that can be used for pretty much any purpose—including taxes. Our application process takes just minutes with no effect to credit score. Apply today and say goodbye to Uncle Sam until next year!

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