What is a Refund Anticipation Loan (RAL)?

A Refund Anticipation Loan (RAL) is a short-term loan that is issued by a financial institution or private lender to a taxpayer, allowing them to access funds based on the expected refund from their tax return. The lender assesses the anticipated refund amount and provides a loan that is typically paid back once the IRS processes the return and releases the actual refund to the taxpayer.

This option accurately describes the nature of RALs, which are contingent on the taxpayer's expected refund from their tax return. Borrowers receive their refund faster through this loan method, as they can obtain funds before the IRS processes their return.

In contrast, other choices describe either loans originating from governmental sources, general assistance for unprocessed returns, or loans from tax preparers, which do not align with the specific type of financing provided by private lenders through a RAL.