Short term loans like peer loans or P2P loans and fixed/variable rate personal loans can be used for paying your tax bill. Zero interest credit card can also be used as a type of short term loan for settling your tax payment if you can finish paying back before the end of the intro period. However, you should check with your credit card to see if it can be used for paying tax as some credit card companies that do not allow customers to use the card for this purpose.
You should avoid using short term loans like payday, cash advance and car title loans to pay for your tax. Payday and cash advance loans have high interest rate which makes it very expensive especially when you are already facing problem in paying your tax. Auto title loans is also not safe because your car can be repossessed if you fail to make repayment by the due date. Both payday and auto title loans have short loan term which is about 30 days from the time the loan is approved.
When shopping around, you should find out whether the interest rate of the loan is higher than the cost of setting up an installment loan with the IRS. Short terms loans charge an average interest rate of 6-21%. The lowest interest rate is reserved for those with excellent credit score. If it cost more than taking out an installment loan with the IRS, it will not be worthwhile to apply the personal loan for purposes of paying your tax.
Before applying for the loan, make sure you find out if it has a fixed or variable interest rate. The advantage of a fixed personal loan is that you will be charged with the same interest rate throughout the loan term. Short term loans that charge a variable interest rate features interest rate that fluctuate from time to time. There is a cap in the variable rate loan which puts a maximum limit on the fluctuating interest rate. If possible, you should find a short term loan with fixed interest rate and monthly payment. This will make it easier for you to handle the repayment with no surprises in the increment of the interest rate.
Short term loans from banks, credit unions or a reputable lender is great for people who owe less than $1,000 on their tax bill. It is important that you commit yourself into making repayment for the loan on the due date as neglecting to do so can harm your credit score. It is safe to use unsecured loans to pay off your tax because you don’t have to provide a collateral. Nowadays, you don’t have to go to the bank to apply for a personal loan. You can easily qualify for a personal loan in a few days by simply signing up online.