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In the U.S., individuals typically file their income taxes for the previous year between January 1 and April 15 (also known as “tax season”). If you didn’t have enough income tax withheld during the year before, you might end up with a tax bill — in 2018, the average American family paid $2,392 in federal income tax, according to USAFacts.
If you owe taxes that you can’t fully cover on your own, a personal loan could be an option.
Here’s what you need to know about loans for tax debt:
- Can you get a loan for tax debt?
- What to do if you owe taxes
- Pros and cons of using a personal loan for tax debts
- IRS payment plans vs. personal loans vs. credit cards
- What if you can’t pay your taxes?
Can you get a loan for tax debt?
Yes, you can use a personal loan to pay off tax debt. However, there are several other options to consider before choosing a personal loan. For example, you might be able to sign up for an IRS payment plan or hardship extension.
If you decide to take out a personal loan for tax debt, be sure to consider as many lenders as possible to find the right loan for you. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.
| Lender | Fixed rates | Loan amounts | Loan terms (years) | Origination fee? |
|---|---|---|---|---|
 View details | 9.95% - 35.99% APR | $2,000 to $35,000** | 2, 3, 4, 5* | Yes |
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state. **Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33. |
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 View details | 6.49% - 29.99% APR | $5,000 to $35,000 | 1, 2, 3, 4, 5 | Yes |
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 View details | 5.99% - 29.99% APR | $5,000 to $35,000 | 3, 5 | Yes |
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 View details | 6.99% - 24.99% APR | $2,500 to $35,000 | 3, 4, 5, 6, 7 | No |
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 View details | 7.99% - 29.99% APR | $10,000 to $35,000 | 2, 3, 4, 5 | Yes |
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 View details | 10.68% - 35.89% APR | $1,000 to $40,000 | 3, 5 | Yes |
LendingClub personal loans review †Based on a majority of borrowers from LendingClub's marketing partners who were issued loans between 1/1/19-12/13/19. The time it takes for your loan to be funded may vary. |
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 View details | 15.49% - 35.99% APR | $2,000 to $25,000 | 2, 3, 4 | Yes |
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 View details | 3.99% - 19.99% APR | $5,000 to $100,000 | 2, 3, 4, 5, 6, 7 (up to 12 years for home improvement loans) | No |
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 View details | 6.99% - 19.99% APR1 | $3,500 to $40,0002 | 3, 4, 5, 6, 7 | No |
1Rate reduction of 0.25% when enrolled in autopay. 2You may be required to have some of your funds sent directly to pay off outstanding unsecured debt. 3After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all your prior payments in full and on time. Marcus will waive any interest incurred during the deferral and extend your loan by one month (you will pay interest during this extra month). Your payments resume as usual after your deferral. Advance notice is required. See loan agreement for details. 4Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans).Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions. |
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 View details | 18.00% - 35.99% APR | $1,500 to $20,000 | 2, 3, 4, 5 | Yes |
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 View details | 5.99% - 17.99% APR | 600 to $35,000 (depending on loan term) | 1, 2, 3, 4, 5 | No |
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 View details | 6.95% - 35.99% APR | $2,000 to $40,000 | 3, 5 | Yes |
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 View details | 5.99% - 18.83% APR | $5,000 to $100,000 | 2, 3, 4, 5, 6, 7 | No |
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 View details | 5.94% - 35.97% APR | $1,000 to $50,000 | 3, 5 | Yes |
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 View details | 8.27% - 35.99% APR4 | $1,000 to $50,0005 | 3 to 5 years4 | Yes |
4The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 25.79% and 36 monthly payments of $37 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved. 5This offer is conditioned on final approval based on our consideration and verification of financial and non-financial information. Rate and loan amount are subject to change based upon information received in your full application. This offer may be accepted only by the person identified in this offer, who is old enough to legally enter into contract for the extension of credit, a US citizen or permanent resident, and a current resident of the US. Duplicate offers received are void. Closing your loan is contingent on your meeting our eligibility requirements, our verification of your information, and your agreement to the terms and conditions on the www.upstart.com website. Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Loans are not available in West Virginia or Iowa. The minimum loan amount in MA is $7,000. The minimum loan amount in Ohio is $6,000. The minimum loan amount in NM is $5100. The minimum loan amount in GA is $3,100. 6If you accept your loan by 5pm EST (not including weekends or holidays), you will receive your funds the next business day. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and funding in accordance with federal law. |
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What to do if you owe taxes
If you end up with a tax bill, here are a few options to manage the debt:
Set up a payment plan with the IRS
Depending on how much you owe in taxes, you might be able to set up a short- or long-term payment plan through the IRS. Keep in mind that while there’s no fee to set up a short-term plan, long-term plans charge anywhere from $31 to $225, depending on how you apply for the plan.
Also note that interest and some penalties will continue to accrue until your balance is paid off.
Learn More: Everything You Should Know Before Taking Out a Tax Refund Advance
Apply for a hardship extension
If paying taxes will cause undue hardship — meaning you’ll face a substantial financial loss if you pay your taxes by the due date — you might qualify for a short-term or long-term hardship extension. This could give you an extra six to 18 months to pay off your tax debt.
Check Out: Online Cash Advance: What Is It and What Are the Alternatives?
Consider a personal loan
If you’d rather deal with a personal loan lender instead of the IRS, you might consider paying off your taxes with a personal loan.
Most personal loans are unsecured, which means you won’t have to worry about collateral. These loans typically range from small loans of a few hundred dollars up to $100,000 or more, depending on the lender.
You’ll generally need good to excellent credit as well as verifiable income to qualify for a personal loan. The time to fund for personal loans is generally one week — though some lenders will fund approved loans as soon as the same or next business day.
However, keep in mind that you’ll pay more in interest on a long-term personal loan compared to a short-term loan.
If you decide to take out a personal loan for your tax debt, be sure to consider how much the loan will cost you over time. You can estimate how much you’ll pay for a loan using our personal loan calculator below.
Enter your loan information to calculate how much you could pay
With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.
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Learn More: How to Check If a Personal Loan Company Is Legitimate
Use a credit card
You could also consider putting your tax balance on a credit card. Some cards offer 0% APR introductory periods, which means you could avoid paying interest if you can repay the balance by the end of this period.
However, if you can’t pay off the card in time, you could be stuck with hefty interest charges.
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Pros and cons of using a personal loan for tax debts
If you’re considering a personal loan for tax debt, be sure to consider the pros and cons first:
Pros of using a personal loan
- Funding can be quick. Some lenders offer fast personal loans that could help you cover your tax bill without delay. If you’re approved, you’ll generally have the funds within a week —though some lenders also offer next- or even same-day loans.
- Wide variety of repayment terms available. A personal loan could give you ample time to pay off your debt. Repayment terms for personal loans usually range from one to seven years, depending on the lender.
- Options available for less-than-perfect credit. While some lenders require good to excellent credit to qualify for a personal loan, others are willing to work with borrowers who have poor or fair credit. For example, you might be able to get a personal loan with a 600 credit score or lower from several lenders. Just keep in mind that personal loans for bad credit typically come with higher interest rates compared to good credit loans.
Cons of using a personal loan
- Might have to pay fees. Depending on the lender, you might have to pay origination fees, late fees, or prepayment penalties — all of which could add to the overall cost of your loan. Keep in mind that if you take out a personal loan with one of Credible’s partner lenders, you won’t have to worry about prepayment penalties.
- Interest might be high. You might pay more in interest on a personal loan than you would on an IRS payment plan or extension, depending on your credit.
- Requires a credit check. When you apply for a loan, the lender will use a hard credit check to review your credit. This could have a negative impact on your credit score. However, this is generally only temporary, and your score could bounce back within just a few months.
Learn More: Where to Get a Personal Loan
IRS payment plans vs. personal loans vs. credit cards
As you compare your options, here are several important points to keep in mind:
| APR | Term | Fees | Penalties | |
| IRS payment plan | Federal short-term rate plus 3% (this rate changes quarterly) |
|
*Low-income taxpayers might qualify for a waiver or reimbursement of setup fees | 0.25% of the tax due per month |
| Personal loan | Varies | 1 to 7 years (depending on the lender) | Might charge:
| None, as long as monthly payments are made on time and in full |
| Credit card | Varies (some cards have a 0% APR introductory period) | N/A (credit cards have no set payoff date) | Might charge:
| None, as long as:
|
Here’s what you might expect to pay for each of these options if you had a $5,000 tax bill you wanted to pay off within one year:
- IRS payment plan: If you sign up for a long-term plan by phone, it would cost you $149 in setup fees and potentially $150 in penalties. Keep in mind that Interest rates on these plans might fluctuate since rates update quarterly. This means you might pay $300 or more in addition to your tax balance. An IRS payment plan might be a good idea if you can afford to pay off your taxes quickly to avoid racking up penalty charges — such as in six months or less.
- Personal loan: Interest rates on personal loans vary depending on your credit as well as the lender. If you took out a $5,000 personal loan with a 10% interest rate and a one-year term, you’d pay a total of $5,274 over the life of your loan. A personal loan could be a good option if you need a longer period of time to pay your tax debt.
- Credit card: Interest rates on credit cards can be much higher than personal loans. If you charged $5,000 to a credit card with an APR of 16.13%, you’d pay a total of $5,447. A credit card might be a good choice if you have a small tax debt and can use a 0% APR introductory offer to repay your balance quickly while avoiding interest. Just remember that if you can’t pay off your card in time, you could be stuck with substantial interest charges.
If you decide to take out a personal loan, be sure to consider as many lenders as you can to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.
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What if you can’t pay your taxes?
If you file your tax return and aren’t able to pay the taxes you owe, you’ll be sent a bill by the IRS that includes unpaid taxes, penalties, and interest. Keep in mind that if you fail to both file and pay your taxes, you could face a combined 5% tax penalty.
You could also consider using a credit card or personal loan — some lenders offer emergency personal loans that could help you cover your balance quickly.
If you owe money and aren’t sure what to do next, a tax professional can help you navigate the filing and extension process.
Keep Reading: Where to Get a $10,000 Personal Loan
About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 4.99-35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 8%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 12, 2019, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.
