This holiday season tax preparers marketed a new loan product that promised quick money and an early jump on tax refunds. What the tax preparers and their partner banks actually offered was high cost, unsecured loans that carried triple-digit annual percentage rates (APR).

Signs advertising the HELP – “Holiday Express Loan Program” and “Instant Money Now” loans, available as early as November, were made based on a person’s projected tax refund and any Earned Income Tax Credits (EITC) using his or her pay stub.

Most pay stub loans carry APRs in the triple digits and often include additional, sometimes hidden, fees. For instance, one lender requires borrowers to receive their pay stub loan on a debit card, in turn requiring them to pay fees to load money onto the card as well as usage fees to use the card.

The pay stub/holiday loan projects the taxpayer’s refund using his or her pay stub, weeks or even months before W-2s are issued. The borrower returns to the lender when the W-2 is received to get his or her taxes done. The tax refund and tax credits are used to pay off the loan, but a second high-cost loan is usually needed to re-pay the charges and fees.

To avoid starting this cycle of expensive debt, low and moderate income taxpayers can receive free tax preparation assistance at sites located throughout the county. Additionally, many credit unions and banks have special savings programs that are much more affordable than pay stub loans and conventional RALs to help people prepare for the holiday season.