4 Loan Alternatives to the Child Tax Credit

iQuanti: Many families will begin to see advance child tax credit payments coming through this fall. However, if you don’t qualify for or have decided to opt out of the child tax credit for tax reasons, you may be looking for other ways to get money. Here’s what you need to know about child tax credit payments and loan alternatives. 
What is the child tax credit?
To help families financially cope with the ongoing COVID-19 pandemic, the government recently expanded the child tax credit for 2021. The government is now offering half of the child tax credit in advance payments instead of offering the credit at tax time.
This advance tax credit may be beneficial to some families but, for those whose financial situations change throughout the year, receiving the tax credit may mean facing an overpayment come tax time. The IRS states that “by accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase.”
If you receive a pay increase at work or have a child that ages out of eligibility, you may be receiving more from the IRS now, which will need to be adjusted on your 2021 taxes. To avoid this situation, be sure to keep your household details updated using the IRS online portal. You can also use the portal to check if you qualify for advance payments or to unenroll.
Opting out of the child tax credit online is easy using the IRS child tax credit update portal. If your tax status is married filing jointly, you’ll want to ensure both spouses log in and unenroll, or one will continue to receive payments.
Loan alternatives to the child tax credit
If you need access to money and your financial situation disqualifies you, or you’ve opted out of the child tax credit, loans can be a great alternative. Here are four loan alternatives to consider.
Cash advance
If you have a steady income, a cash advance can tide you over until payday. This type of loan is secured by your paycheck, meaning you can get cash now and then use your future paycheck to repay the loan, thereby avoiding unnecessary interest and fees.
Installment loan
An installment loan, like a personal loan, is an option where you receive a lump sum of cash, then repay it over a set number of months with consistent payments. These loans often come with a fixed interest rate, meaning you’ll know exactly how much you’ll be paying and the date on which you’ll have the loan fully repaid.
Line of credit
A line of credit, whether secured, like a home equity line of credit (HELOC), or unsecured, like a credit card or personal loan, is a flexible loan that can give you access to money whenever you need it. A revolving line of credit means you can pull out as much or as little as you want up to your credit limit, then only pay interest on the amount you use.
Title loan
If you own a car and have access to its clean title in your name, you can use the car’s title to obtain a loan. Title loans can be a simple way to get fast cash. But keep in mind that you’ll need to stick to the repayment terms. Otherwise, the lender reserves the right to repossess your vehicle.
The bottom line
Before you accept the child tax credit advance payments, it pays to understand how they will affect your taxes for 2021. If you need access to money, you can consider loan alternatives to the child tax credit like cash advances, installment loans, lines of credit, and title loans. Be sure you fully understand the loan terms and commit to paying them back on time to avoid excess and unnecessary fees and interest.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: iQuanti, Inc.