Nobody likes having to pay taxes, however, these are an important part of our financial lives. They also do not offer any flexibility when it comes to due dates or amounts that you have to pay. This can create extremely stressful situations, especially when you do not have the money to pay your taxes.
An increasingly larger number of people have started taking out personal loans to pay their taxes, however, this financial decision is not always a good one. In the long run, it can do a lot more harm than good, especially if the economy is unstable.
When is it a good idea to pay your taxes using a personal loan?
Generally speaking, taking out a loan to pay your taxes is only effective if the cost of the loan is smaller than the one of entering into an IRS payment plan. This having been said, keep in mind that the IRS offers several payment plans that are specially designed to help people who are not able to pay their taxes on time. In other words, the plans are already optimized to be great ways to pay the money that you owe to the state.
This means that you should always consider taking out a loan to pay your taxes, as a last resort. In most cases, you should be able to find alternative means of getting the money that you need, regardless of how much you earn or what your credit score is. Make sure to go through all the other options before going to the bank and borrowing money.
Make sure to first explore other options and only use the personal loan as a last resort
If you are not able to make the payments, try to look for other ways of finding the money that you need. For example, if you have a credit card that has a 0% introductory APR, you may find it cheaper to use it to pay your taxes rather than getting a personal loan from the bank.
As a word of caution, keep in mind that if you decide to pay your taxes using a credit card, you will have to pay a fee that is equivalent to at least 1.87% of the balance due.
If this option does not suit you, there is also the possibility of using an online money-lending platform and borrowing the money from there. Most platforms do not perform credit score checks and do not place any sort of restrictions on what you can do with the money that you borrow. Furthermore, depending on when you are due to pay the taxes, you may be able to find platforms that can transfer you the funds in under 24 hours, however, the faster you get the money, the larger the interest rate will be.
The main advantages of online lending services are the speed with which you get the money and the fact that the loan will not affect your credit score. However, the overall cost of the online loan may be higher than what you would plat if you entered an IRS payment plan.
Consider the issues created by how you handle your unpaid taxes
Not paying your taxes on time can have serious consequences. If you only need a couple of days more to get the money there shouldn’t be any serious problems, however, if a week or more passes, you may face collection against you, which will not give you any choice.
If you do not have the money to pay your taxes and no other options are available, go to the bank and get a personal loan as fast as possible. Keep in mind that banks may require several days to assess your situation and decide if you are eligible for the loan or not. If you have a bad credit score, it may take even longer.
The government offers a large number of alternatives if you do not have the money to pay your taxes, but this requires you to think ahead and to decide which financial option is best for you. Regardless of how you choose to get the money, always pay your taxes. Avoiding the issue will only lead to serious legal action against you, which may be much more expensive in the long run.
Overall, using a personal loan to pay your taxes is only useful if the cost of the loan is lower than that of your other financing alternatives. Keep in mind that when you borrow money from the bank in order to pay your taxes, your credit score may be affected, on top of the fact that you will still be short on cash until you repay the loan.