Best Personal Loans for Paying Taxes

If you've found yourself with unexpected tax debt and you don't have the funds readily available to make the payment, don't panic. You have several options to consider, including personal loans. Here are three of the best personal loans to consider for paying your taxes.

Tax season is upon us. While the thought of a refund is nice, it's also possible to end up owing the government money.

The only thing worse than being stuck with a tax bill is being unable to pay. The amount owed needs to be paid by the filing deadline. If you don't, you'll be faced with additional fees and penalties. According to Mark Nichols, a CPA at Landmark Financial Services, “the IRS uses penalties and fees in an effort to try to change taxpayer behavior. The seriousness of the penalty is designed to amp up the behavioral change.”

If you've found yourself with unexpected tax debt and you don't have the funds readily available to make the payment, don't panic. You have several options to consider, including personal loans. Here are three of the best personal loans to consider for paying your taxes.

Pay Your Taxes Before the April 15th Deadline

Income taxes have to be paid by the April 15th filing deadline. Otherwise, the money that you owe is subject to penalties and interest. A personal loan can help you to make your payment on time so that you avoid the tax implications.

The earlier you file, the better your chances of getting a loan in time to make the payment. If you wait until the last minute to file, though, there are options that provide faster turnaround times. Some lenders provide decisions within hours and funds within 24 hours.

Releasing a Tax Lien

Failing to pay tax debt can result in a federal tax lien. Paying what you owe is the best way to get a lien released. The Internal Revenue Service (IRS) releases the lien on your property within 30 days of payment.

Paying Your Business Taxes

If you own your own business, you need to report your earnings to the IRS and pay taxes on them. What you pay (and how much) depends on how your business is set up. A tax professional can help to ensure that your tax return is completed correctly. Should you end up owing, a personal loan can help you to cover the cost.

Avant

Founded in 2012, Avant is an online lender specializing in personal loans for borrowers with less than perfect credit. The company aims to help middle-income borrowers with such needs as consolidating high-interest debt, making home improvements, and dealing with unexpected expenses, including taxes.

Rates, Terms, and Fees

Avant's APR ranges from 9.95% to 35.99%. Your rate is fixed and depends on several factors, including:

  • Your credit history
  • Your state
  • The terms of your loan

Generally, the better your credit score, the better your interest rate.

Loan terms range from 24 to 60 months (2 to 5 years). You can typically select from:

  • 24 months
  • 36 months
  • 48 months
  • 60 months

Not all terms are available to all applicants. The terms you're offered are based on your qualifications.

In most cases, borrowers who choose a longer-term loan will receive lower interest rates than those who choose a shorter term. With shorter terms, you'll pay more each month, but less over the life of the loan than those who choose to take longer to pay off their balance.

Avant charges additional fees as well, including:

  • An origination fee of 4.75%
  • Late payment fees which vary from state to state
  • Returned payment fees

Funding Amounts

You can borrow between $2,000 and $35,000 with Avant. The actual minimum loan amount varies from state to state.

Time to Funding

Avant's funding time is very quick. In most cases, you can get your funds as soon as the next business day.

Loan Requirements

Most of Avant's borrowers have credit scores ranging from 600 to 700. If your credit score is less than perfect, it's still possible to qualify for funding. You will also need to provide the following to see if you qualify:

  • Your housing information, including your monthly payments
  • Your type of income (full-time employment, part-time employment, self-employment)

Applying for a Personal Loan

Before filling out the application, you can find out if you qualify by filling out a pre-qualification form on Avant's website. After providing the necessary information, Avant performs a soft credit check, which doesn't impact your credit score.

If you are pre-qualified and choose to continue with the formal application, Avant performs a hard credit check. A hard credit inquiry will appear on your credit report and may affect your score.

Following approval, you will be given the rates and terms of your loan. If you accept them, you can sign the documents. Once everything is complete, your funds are deposited into your bank account.

Pros and Cons of Avant

Pros

  • Applicants with less than perfect credit can still qualify
  • Funding takes as little as one business day
  • There are no penalties for paying the balance of your loan before the end of your term
  • Rates are fixed, unlike those of a credit card

Cons

  • There is no co-borrower option
  • Avant is not available in all states

Upstart

Upstart was founded in 2012 by “ex-Googlers” and offers several different types of loans, including a personal loan for paying taxes. The company uses artificial intelligence and machine learning to automate the borrowing process. An algorithm is used to determine your creditworthiness based on factors such as your job history, career, and education. Since the company began in 2012, Upstart has received $6.1 billion in loan originations.

Rates, Terms, and Fees

Upstart charges fixed rates, with APRs ranging from 6.53% to 35.99%. The full range of rates varies by state. The rate you receive depends on several factors.

You have two options for loan terms with Upstart:

  • 36 months (3 years)
  • 60 months (5 years)

You may be charged additional fees, including:

  • An origination fee of up to 8% of the total amount borrowed
  • A late payment fee of 5% of the past due amount or $15, whichever is greater
  • A returned payment fee of $15 per occurrence

Funding Amounts

You can borrow between $1,000 and $50,000 through Upstart. The minimum amount that you can borrow does vary from state to state. Loan amounts are based on factors such as:

  • Your credit history
  • Your income
  • Other information provided in your loan application

Time to Funding

If you accept your loan offer by 5 p.m. EST, you will have your funds as soon as the next business day. Weekends, holidays, and your bank's processing time will affect the exact time needed to receive your money.

Loan Requirements

To qualify for an Upstart loan, borrowers must have a minimum credit score of 620. Less than perfect credit doesn't prevent you from getting the funds you need.

Other loan requirements include:

  • A minimum annual income of $12,000
  • A full-time job or an offer starting within the next 6 months, a part-time job, or another source of income
  • No recent delinquencies or bankruptcy

Applying for an Upstart Personal Loan

You can find out if you qualify for a loan before you actually apply. Pre-qualification takes only a few minutes and allows you to see what rates you qualify for.

If you do qualify, you can then begin the actual application. You may be asked to upload additional documentation such as employment verification, work experience, or academic credentials. Upstart performs a hard credit check during this process. If you are approved, you will be given your actual rates and terms. Once you accept the offer, your funds will be deposited.

Pros and Cons of Upstart

Pros

  • Borrowers don't need to have perfect credit to qualify
  • Rates can be as low as 6.53%
  • Multiple factors are taken into consideration to determine your eligibility
  • Your loan can be funded as soon as the next business day
  • There are no penalties for paying off your loan early

Cons

  • You have only two options for loan terms
  • Origination fees can be as much as 8% of the total amount borrowed
  • You cannot apply with a co-borrower
  • Upstart is not available in all states (Iowa and West Virginia residents are not eligible)

LendingClub

LendingClub was founded in 2007. The company is a peer-to-peer lending platform, connecting borrowers with investors with the belief that innovative and creative solutions create better value and a better experience. The company offers several different products and services and is committed to ensuring that borrowing and investing is a seamless process for everyone involved.

Rates, Terms, and Fees

LendingClub charges a fixed-interest rate, with APRs ranging from 6.95% to 35.89%. Your APR is determined by your credit at the time that you apply, as well as:

  • The total amount requested
  • How much you owe other creditors

LendingClub offers two term options:

  • 36 months (3 years)
  • 60 months (5 years)

Fees associated with LendingClub's loans include:

  • An origination fee ranging from 1% to 6% of the amount requested
  • A late payment fee of 5% of the unpaid amount or $15, whichever is more
  • A returned payment fee of $15 if you don't have enough funds in your bank account to cover your payment

You will not be charged an application or brokerage fee when you apply.

Funding Amounts

You can borrow between $1,000 and $40,000 through LendingClub.

Time to Funding

Following the approval of your loan, it typically takes about 4 days to receive your funds in your bank account. If you plan to use LendingClub, filing your taxes a few days before the deadline is recommended to ensure you have your funds in time.

Loan Requirements

LendingClub has a minimum credit requirement of 600, so borrowers with imperfect credit can still get the funds they need to pay their taxes. Other requirements include:

  • A credit history of at least 3 years
  • A debt-to-credit ratio of less than 40% (35% for joint applicants)
  • You must be at least 18 years old

Applying with LendingClub

Before you apply, LendingClub allows you to check your rates. The process takes just a few minutes to complete.

If you qualify, LendingClub will show you your rates, how much you can borrow, your term, and your origination fee. You can then continue with the actual application, which will request additional information. During this time, LendingClub will perform a soft credit pull, which will not impact your credit.

Your loan will be accessible to a pool of investors. The investors can view your details and decide if they want to fund your loan. Your loan can be funded by a single investor or several of them.

Once your loan is fully funded, LendingClub finalizes the details. During the process, the company performs a hard credit inquiry, which will appear on your credit report and may affect your score. When your loan is finalized, the funds are deposited into your bank account.

Pros and Cons of Lending Club

Pros

  • The minimum credit score is 600, making LendingClub accessible to many borrowers
  • There are no prepayment penalties
  • The application is quick and simple
  • You can apply with a co-borrower

Cons

  • There are only two term options
  • You are charged an origination fee of 1% to 5% of the total amount borrowed
  • Iowa residents (and residents of US territories) cannot apply

Tax time is stressful, especially when you find out that you owe the IRS money. A personal loan can help you to pay your debt, enabling you to avoid penalties, fees, and possible tax liens. When looking for a personal loan, you should compare your options carefully to help you find the best loan for your situation.

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