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At Solvable, we care about your financial well-being and are here to help. Our research, articles and ratings, and assessments are based strict editorial integrity. Our company gets compensated by partners who appear on our website. Here is how we get compensated.
At Solvable, we care about your financial well-being and are here to help. Our research, articles and ratings, and assessments are based strict editorial integrity. Our company gets compensated by partners who appear on our website. Here is
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If you qualify, you can get a personal loan to pay off your back taxes, but weigh the pros and cons of doing so first.
When getting a loan, compare interest rates among several lenders, and pay attention to fees and requirements before making your decision.
Other back tax assistanve options include using a credit card, using a home equity line of credit, getting an offer in compromise, or paying it off in installments.
When faced with a tax bill you can’t afford, things can seem bleak. Back taxes aren’t something you want to fall into. And if you don’t pay off your taxes in a timely manner, the Internal Revenue Service (IRS) isn’t very forgiving. Fortunately, you have options — one of which is taking out a personal loan. Here’s how to determine if you should use a loan to pay off your back taxes.
Pros and Cons of Getting a Loan
You can get a personal loan for pretty much anything, including to pay off your taxes. The loan amount can range from $2,000 and $50,000, and you typically have to pay it back within one to seven years. While this seems simple enough, weigh the pros and cons of taking out a loan before doing so.
Pros
Lower fees. If you don’t pay your taxes on time, the IRS will hit you with both interest and fees. While you’ll also pay interest on a personal loan, you might not have to pay fees, saving you money in the long run.
More time. Because you have several years to pay off a personal loan, it’s often more feasible and less stressful than trying to pay back your back taxes.
Good standing with the IRS. A personal loan allows you to pay off your back taxes all at once. You avoid not only the IRS’s interest and fees but also other consequences of being in back taxes, such as seized assets and property liens.
Cons
High interest rates. If you don’t have a good credit score, lenders might tack on a higher interest rate than you’d have to pay the IRS. Compare options with various lenders to see which one is lowest. If you do get stuck with a high interest rate on a personal loan, try to pay it off early to avoid owing as much.
Hidden fees. Read the fine print about your loan. Some come with additional fees and costs that aren’t immediately apparent.
Continued debt. Even though a personal loan will allow you to pay your taxes, don’t forget you still have an amount to pay. Make sure you’re financially able to take on a loan and pay it off in time. Otherwise, you risk lowering your credit score and affecting your ability to get loans in the future.
How to Get a Loan
If it makes sense to use a personal loan to pay off your back taxes, getting the loan is fairly straightforward. First, check your credit score to see if you’re likely to qualify for a good interest rate. Then go to several banks, credit unions, and even online lenders to find out what interest rate you actually qualify for. Compare these to find out which lender offers the best rate. Don’t just compare interest rates, however; also check the annual percentage rate, penalties for prepayment, and origination fees.
When you decide on a lender, be prepared to present documentation such as your government-issued identification, Social Security number, employment and financial information, and, in some cases, a copy of your tax bill.
In some scenarios, it doesn’t make sense to get a personal loan to pay your back taxes. For instance:
When you owe more than $50,000. If you own the IRS more than this amount, a loan is not going to cover it in full.
When you have a poor credit score. You usually won’t qualify for a loan (or at least not a competitive one) if your credit score is lower than 650.
When you can’t afford monthly payments. Don’t take on a loan you can’t afford to pay it back; this will impact your credit score for years to come.
Other Options
If you determine you cannot or do not want to use a personal loan to settle your back taxes, you do have other payment options.
Credit Card
If the amount you owe is less than your card’s limit, and you believe you can pay your balance soon enough to avoid affecting your credit score, putting your back taxes on a credit card might make sense. Credit card interest rates, however, are often higher than that of the IRS. One way around this, if your credit score is high enough, is to open a new credit card with a zero-percent interest promotion. Put your tax payment on a credit card that has a rewards program so you can earn points or cash as you pay it off.
Offer in Compromise
With an offer in compromise, the IRS agrees to let you pay off your back taxes for less than you owe. You must meet certain criteria, however, to qualify for this arrangement.
Payment Plan
If you owe less than $50,000 on your taxes, the IRS might allow you to pay off that amount in installments for up to six years. This option typically comes with penalties and high interest rates, however.
Home Equity Line of Credit
If you can secure a lower interest rate on a home equity line of credit than what the IRS charges, this option might make sense. In this scenario, you borrow against whatever equity you have in your home. If you default on this line of credit, however, the bank can take possession of your home.
If you’re struggling or unable to pay off your back taxes, you can find assistance in several ways. One of those is using a personal loan to pay the IRS. Contact our experts at Solvable to find out if this is the right option for you.
Solvable is a for-profit company that helps customers resolve their tax problems, but a free service for consumers. Partners cannot pay us to guarantee favorable editorial reviews or ratings. We do not publish favorable (or unfavorable) editorial reviews or assessments at the direction of an advertiser or partner. We always work to put consumers first and do our best to provide value in meaningful ways, but our reviews are subjective.
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Solvable is compensated by some of the companies seen on our website. Most often, Solvable receives fees when one of our readers clicks, fills out a form, applies for, or receives a financial product from one of our partners. We also earn fees for capturing consumer stories and writing about them, displaying advertising, having our partners sponsor certain parts of the site, and writing content that may be relevant to our partner and their audience. This compensation may impact where products appear on this site, including article pages, comparison listings, the order in which they appear or if they will even appear on a given page, and our matching recommendations. Solvable has not written about, reviewed, or rated all financial products available to consumers.
In addition, we may be compensated in the following ways:
Referrals to consumers who use the online form or locator line that may provide expert answers to questions;
Marketing tax resolution, tax preparation, tax audit help and general tax assistance.
Referrals to services that help consumers with tax resolution, tax preparation, tax audit help and other tax issues.
We do recommend that you shop around and compare services and costs with other companies while performing your own due diligence, especially since people’s experiences with companies can change over time.
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The offers that you are matched up with are from companies or attorneys/law firms that we may receive compensation from. Based on our initial review of such companies or individuals, we feel comfortable introducing them to our readers. We won’t recommend something just because we’re offered payment to endorse or promote it. However, we do recommend that you shop around and compare services and costs with other companies while performing you own due diligence, especially since people’s experiences with companies can change over time.
We are not attorneys and we don’t provide legal advice. As always, we encourage you to do your homework and check out individuals and companies before you hire them. If you are already working with an attorney, we urge you to ask them your questions. After all, they will be familiar with your situation and the laws in your state.
We hope that you find Solvable helpful in your efforts to get a fresh start.
Personal Loans Advertiser Disclosure
The Personal Loan offers that appear on this site are from companies or affiliates from which solvable may receive compensation. This compensation may impact how and where products appear on this site (including for example, the order in which they appear or whether a lender is “featured” on the site). solvable does not include all Personal Loan companies or all types of offers available in the marketplace.
Personal Loan Providers determine the underwriting criteria necessary for approval. You should review each Provider’s terms and conditions to determine which loan works best for you and your own personal financial situation. All reasonable efforts are made to provide and maintain accurate information. All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each Provider’s or affiliates discretion. There is never a guarantee you will be approved for credit or that upon approval you will qualify for the advertised rates, fees, or terms that were shown.
Be sure to speak with your representative about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask up front about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $35,000 may be available through participating lenders or affiliates; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. In some cases, lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Ask your representative for details.
Credit Card Advertiser Disclosure
The card offers that appear on this site are from companies or affiliate offers from which solvable may receive compensation. This compensation may impact how and where products appear on this site (including for example, the order in which they appear). solvable does not include all card companies or all card offers available in the marketplace.
Credit Card Providers determine the underwriting criteria necessary for approval. You should review each Provider’s terms and conditions to determine which card works for you and your personal financial situation. Information is provided by the Credit Card Providers and is not a guarantee of approval.
All credit card rates, fees, and terms are presented without guarantee and are subject to change pursuant to each Provider’s discretion. All reasonable efforts are made to provide and maintain accurate information. There is no guarantee you will be approved for credit or that upon approval you will qualify for the advertised rates, fees, or terms shown.
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See the online Provider’s credit card application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However all credit card information is presented without warranty. When you click on the “Apply Now” button, you can review the credit card terms and conditions on the provider’s website.
Business Loans Advertiser Disclosure
Business Loan offers that appear on this site are from companies or affiliates from which solvable may receive compensation. This compensation may impact how and where products appear on this site (including for example, the order in which they appear or whether a lender is “featured” on the site). solvable does not include all Business Loan companies or all types of offers available in the marketplace.
Business Loans are those loans that are for commercial use and any property and/or proceeds from the proposed request will be used by the requestor for commercial purpose only and not for any personal, family or household purposes.
Most of our Business Funding Partners or affiliates, do not require collateral for business loans; however, please note that it is possible to be offered another product by the lender depending on your needs and if the underwriting requirements dictate the same. Traditional bank and SBA loans generally are known for collateral requirements.
There is no one-size fits all business loan. Rather there are several types that will likely be offered and or discussed with you upon completing your request. Business Funding Partners determine the underwriting criteria necessary for approval, you should review each Partner’s terms and conditions to determine which business funding option works for your business’s financial situation. All reasonable efforts are made to provide and maintain accurate information. All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each Partner’s discretion. There is never a guarantee your business will be approved for credit or that upon approval your business will qualify for the advertised rates, fees, or terms shown. Lender terms and conditions will apply and all products may not be available in all states. Ask your loan representative for details.
Student Loan Refinancing Advertiser Disclosure
Student loan offers that appear on this site are from companies or affiliates from which solvable may receive compensation. This compensation may impact how and where products appear on this site (including for example, the order in which they appear or whether a lender is “featured” on the site). solvable does not include all student loan companies or all types of offers available in the marketplace.
Pursuant to the contracts between solvable and the Partners or affiliates on its Network, solvable may also receive information from the Partner or affiliate regarding the status of your application including, but not limited to, the amount or disposition of your loan. Information specific to the Partner/affiliate’s use of your information will be found in their specific Privacy Policy.
Potential savings may vary based on the interest rates, balances and remaining repayment term of the loans you are seeking to refinance. Your overall repayment amount may be higher than the loans you are refinancing even if your monthly payments are lower. Variable rate options will fluctuate over the term of your loan with changes in the LIBOR (or other index utilized by the lender) rate, and will vary based on applicable terms and presence of a cosigner. Fixed interest rates may be based on applicable terms and presence of a co-signer. Additional terms and conditions, and rates are subject to change at any time without notice and may not be available in all states or for all types of current student loans. Such changes should only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Lenders are required to provide every potential borrower with disclosure information before they apply for a private student loan. The Lender you select is required to provide you with an Application Disclosure and an Approval Disclosure within the application process before you accept the terms and conditions of your loan. solvable is not a lender or creditor, it does not offer, extend or alter credit terms. Only participating lenders can perform the full application and deliver the required disclosures, please ask your lender about rates, terms, fees, and potential discounts that may be available for each product.
Please Note:
Certain federal and private student loans may not be eligible for consolidation/refinance.
Certain consolidation/refinance plans may result in higher monthly payments or negative consequences (i.e. prepayment penalties).
Consolidation/refinance may lead to other negative results, such as loss of grace periods.
Loans in default generally cannot be consolidated until completion of a repayment trial plan so tell your lender if you are in default and determine relevant options (be wary of those asking for upfront fees as well)
Other options or programs may fit your needs (i.e. personal loan, debt consolidation and/or debt relief). Consult your financial and/or tax advisor prior to making any decisions.
Solvable is not a creditor as it does not offer, extend or alter credit; rather it is an online market lead generator that allows consumers to shop and compare rates, terms and costs associated with financial products such as mortgages, auto loans, personal loans, student loans, etc. solvable does not originate or fund any product it markets; rather it has a network of lenders or Partners/affiliates. You may choose to speak with one or more of these lenders or Partners/affiliates to determine what your actual terms and savings may be. Only a lender can provide you with a formal application for credit, your inquiry form here is merely an expression of interest and/or intent to obtain credit or assistance. You must discuss your actual credit situation and fill out the lender’s required documents prior to obtaining an extension of credit. Network lenders may not have the best or the lowest rates so you are encouraged to continue to shop and compare additional lenders, credit unions, local financial institutions, etc. to ensure you are truly getting your best deal for your situation.
You should contact your tax professional or other financial advisor to determine if you can actually realize savings by refinancing when it can extend the life of your current loan. You should ask the lender about all terms, rates, fees and costs associated with each product and if you will realize a net tangible benefit from the same. All initial estimated savings is done by trying to calculate what your rate may be; however, solvable does not have that information and cannot guarantee potential savings or that lenders will approve you for such product that would warrant those savings. Rates are not guaranteed and change daily. Lenders/Brokers/Dealers/Partners that perform the actual underwriting will have to determine if you meet their underwriting criteria which is unknown to solvable at the time of matching/offer/quote delivery. All amounts are estimates and examples only and do not represent an actual offer.
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