Credible Takeaways
- If you have tax debt, you can use an unsecured personal loan to pay it off.
- Other options include a payment plan through the IRS or paying with a credit card.
- Each option has different fees and interest rates, so it’s important to research which is right for you.
Every year, about a third of all taxpayers wait until the last minute to file their federal income tax returns. If you were one of them and underestimated your 2023 tax obligation, you could soon owe money to the IRS.
If you made a mistake calculating your taxes or filed your return but didn't pay the full amount you owe, you could get a CP14 notice from the IRS — the service usually sends them out within 60 days of deciding your tax return misstated the amount you owe.
If you owe taxes that you can’t fully cover on your own, a personal loan could be an option.
Can you get a loan for tax debt?
Yes, you can use an unsecured personal loan to pay off tax debt. However, you should consider other options before choosing a personal loan. For example, you might be able to sign up for an IRS payment plan or hardship extension. A 0% APR credit card could also be an option if you can afford to pay the debt off within the promotional period.
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.
Tip
If you’re a low-income taxpayer who signs up for a long-term payment plan, you might qualify for a waiver or reimbursement of the fees charged for setting up the plan.
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.
Keep in mind
While you won’t owe interest on any taxes you pay before the due date, interest will accrue on the amount you pay after the due date. You might also be charged penalty fees if you don’t pay your balance off by the end of the extension.
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. In fact, the IRS says that often the cost of a loan is less than the penalties and interest the IRS charges under federal law.
Most personal loans are unsecured, which means you won’t have to worry about collateral such as your home or vehicle. 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, usually meaning a FICO score of 670 or higher, as well as verifiable income to qualify for a personal loan. The time to fund for personal loans is generally within a week — and some lenders will fund approved loans as soon as the same or next business day.
Depending on the lender, you’ll typically have one to seven years to repay a personal loan, which could give you more time to pay off your debt compared to a payment plan.
However, keep in mind that you’ll pay more in interest on a long-term personal loan compared to a short-term loan.
Good to know
The IRS says that often the cost of a loan may be is less than the penalties and interest the IRS charges under federal law.
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.
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.
Good to know
IRS payment processors typically charge a fee of up to 1.98% for using a credit card. If you owe $2,500, for example, you could end up with a fee of $49.50 if you pay it with a credit card.
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 1 to 7 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.
- Interest rate depends on your credit score. 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.
Check Out: 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:
| | | | |
---|
| Federal short-term rate plus 3% (this rate changes quarterly) | Short-term plan: Up to 120 days Long-term plan: Up to 6 years (depending on what you owe) | Short-term plan: $0 Long-term plan: $31 to $225* (depending on whether you set up the plan online, by phone, or in person) *Low-income taxpayers might qualify for a waiver or reimbursement of setup fees | 0.25% of the tax due per month |
| | 1 to 7 years (depending on the lender) | Might charge: Origination fees Late fees Prepayment penalties | None, as long as monthly payments are made on time and in full |
| Varies (some cards have a 0% APR introductory period) | (credit cards have no set payoff date) | Might charge: Annual fees Late fees Over-limit fees penalties Cash advance fees | None, as long as: Monthly payments are made on time and in full You don’t spend more than your limit |
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 $225 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.
What if you can’t pay your taxes?
You may also receive a CP14 notice if you filed your tax return and didn’t pay all the taxes you owe. The notice will include your 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 per month, up to 25% of your unpaid taxes.
Tip
Filing and then applying for an extension or payment plan is generally a better move than not filing at all. This way, you can avoid paying excessive penalties and interest.
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.
Compare Rates Now
Personal loan lenders
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.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 20 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
pros
- Same-day funding available
- High maximum loan amount
- No origination fee
cons
- Good credit required
- No prequalification process
- Not available in Vermont
Repayment terms
2 - 20 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the same business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 9.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
pros
- Secured loans available
- Low minimum income requirement
- Scored second in J.D. Power's Consumer Lending Satisfaction Study
- Funds in 1-3 business days
- High close rate on loans through Credible platform
cons
- Origination fees
- No discounts
- Not available in DC, IA, VT, or WV
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
pros
- May fund in 1 business day
- No minimum credit score requirement on lender site
- Low minimum APR
- Trustpilot score of 4.9/5 stars
cons
- May charge a high origination fee
- No discounts offered
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Read full reviewOverview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
pros
- Excellent customer reviews on Trustpilot
- Funding as soon as the next business day
- Large loan amounts available
cons
- Possible origination fee up to 7.49% (through Credible)
- Other lenders may have lower starting APRs
- No cosigner option
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Read full reviewOverview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
pros
- Mobile app
- Low minimum income requirement
- High close rate on loans made through Credible
- Available in all states
cons
- Origination fee
- No discounts
- Funding not as fast as some competitors
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Read full reviewOverview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
pros
- Mobile app
- Live chat
- Low maximum APR
cons
- Limited loan terms available
- No discounts
- Origination fees
- Not available in MA or NV
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Read full reviewOverview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
pros
- No fees required
- Large loan amounts available
- Autopay and direct pay discounts
- Same day funding
- Long loan terms available
cons
- Good credit required
- 5,000 minimum loan amount
Fees
Option to pay an origination fee in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Read full reviewOverview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
pros
- Borrowers with bad credit considered
- Funds as soon as the next business day
- 2-year loan terms available
cons
- No discounts offered
- Origination fee
- Not available in HI, WA, IA, MA, ME, NY, VT, or WV
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Read full reviewOverview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
pros
- Fair credit borrowers eligible
- Autopay and direct pay discounts
- Can fund in as little as 1 business day
- Mobile app
- Secured loans available
cons
- High maximum origination fee
- Cosigners not accepted on home improvement loans
- Low J.D. Power ranking
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Read full reviewOverview
BHG Financial stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 3% and 4%, depending on your financial profile. Loan funds are available within five to 14 days of loan approval. Note that you can't prequalify with BHG.
pros
- Eligible applicants can borrow up to $200,000
- Considers borrowers with fair credit
- Long repayment terms
cons
- Not available in IL, ND, and MT
- No discounts
- Minimum annual income requirement of $100,000
- Funding takes at least five days
Fees
Origination fees, late fees, other fees may apply
Eligibility
Available in all states except Illinois, North Dakota, and Montana