Man paying taxes on phone at coffee shop.

Can You Use A Personal Loan To Pay Taxes?

Matt Cardwell5-Minute Read
UPDATED: July 26, 2023


Tax season can seem difficult to navigate, and it doesn’t always end once you’ve filed your tax return. Although some Americans may receive a tax refund, others may receive a tax bill. Instead of receiving a check in the mail, you may end up owing thousands of dollars to the Internal Revenue Service (IRS).

If you're facing an expensive tax bill, then finding a way to pay that bill can be a challenge. One option for paying off your bill to the IRS could be to take out a personal loan. This article will explain how you can use a loan to pay your taxes, and the benefits and drawbacks to doing so.

Using A Personal Loan To Pay Off Your Tax Bill

As stated above, you can use a personal loan to pay your taxes. If you owe thousands of dollars, a personal loan can allow you to make an on-time payment for the full amount of your taxes to the IRS by the deadline. It can also act as a financial buffer and cover living expenses, or be used for other reasons.

Although you will still need to make regular payments for the entire loan term, these are generally more manageable than taking on unnecessary tax debt.

What Happens If You Can’t Pay Your Taxes?

The IRS can charge a number of different tax-related penalties, depending on the transgression. A Failure to Pay penalty will be issued if you can’t pay what you owe in taxes by the due date, equal to 0.5% of the unpaid taxes for every month they’re not paid. The IRS also charges interest on these penalties.

Above all, it's important to pay your taxes by the deadline, otherwise you might be required to pay the penalties in addition to your taxes.

Pros And Cons Of Using A Personal Loan To Pay Your Taxes

A personal loan can potentially help you out of a tough situation if you have a high tax bill, but it may not be for everyone. Consider the benefits and drawbacks of this solution below.


  • Personal loans are typically unsecured and don’t require collateral.
  • Fixed-rate personal loans will have the same monthly payment amount for the life of the loan.
  • You can typically receive your money in 1 – 7 business days.


  • Borrowers with lower credit scores could get higher interest rates.
  • Missing a payment or defaulting on the loan could hurt your credit score.
  • Most lenders won’t offer personal loans for less than $1,000.

How To Get A Personal Loan To Pay Your Tax Bill

Getting a personal loan involves a relatively straightforward process:

  • Shop around for the best rates and terms available.
  • Choose a lender and complete an application – this may involve a hard inquiry.
  • If approved, wait to receive your money.

Some lending platforms, like Rocket Loans℠, allow you to complete an application for your personal loan completely online. As mentioned above, you can generally expect your money to reach you within 1 – 7 business days, if approved. If you're approved through Rocket Loans, you can potentially receive your funds on the same day.*

Once you have your funds, you may be able to pay your tax bill on time.

Other Ways To Pay Your Tax Bill

A personal loan is not the only way to fund an unexpected tax bill. Here are some other options to consider before you move forward:

Emergency Funds

If you have an emergency fund on hand, then you may be able to cover this expense. Many experts recommend building an emergency fund with at least 3 – 6 months' worth of expenses. In some cases, you might have enough to pay your tax bill. However, you don't want to drain your funds to the point that you couldn't cover another emergency in the near future.

IRS Payment Plan

The IRS offers some payment options that could be helpful to your situation.

First, they offer a short-term payment plan that requires you to pay the full amount within 120 days. You'll need to owe less than $50,000 to qualify for this option. As a second alternative, they offer a long-term plan that will allow you to pay the full amount in more than 120 days. You'll need to owe less than $100,000 to qualify for this option.

Keep in mind that over the course of your repayment plan, you'll be required to pay interest on your tax bill.

Credit Cards

If you already have a credit card account open, it can be tempting to pay your taxes that way. However, this could be an expensive strategy. Credit card interest rates can creep into the double digits quickly, which can lead to a fast-growing mountain of debt

Another strategy would be to sign up for a new card that offers a 0% APR promotional period. This can give you 12 – 18 months of interest-free repayments. If you have a large tax bill, though, that may not be enough time to pay everything off before interest kicks back in. 

Additionally, you'll need to pay a processing fee to pay your taxes with a credit card. Although the processing fee will represent a relatively small percentage, it could be a significant amount of money depending on the size of your tax bill.

Home Equity Loan Or HELOC

A home equity loan can be a risky way to pay your tax bill. When you take out a home equity loan, you're using your home’s equity as collateral to secure the loan. Essentially, that means that if you can't make your payments, then you risk losing your home through the foreclosure process. 

A similar option is a home equity line of credit (HELOC), but instead of a loan you get a line of credit you can borrow from up to a certain amount. This option also carries the risk of losing your home through foreclosure.

Should You Take Out A Loan To Pay Taxes?

If you have a good credit score, taking out a personal loan may be a solid option. With a good credit score, you can likely find competitively low interest rates that can limit the cost of your personal loan. With fixed rates, you can also repay your personal loan without worrying about rising interest. You'll likely be able to pay your tax bill in full without worrying about working out a payment plan with the IRS.

Without a good credit score, though, a personal loan can be more expensive to obtain. If you want to pursue a personal loan to pay off your taxes, take steps to improve your credit score so that you can qualify for the best rates.

Final Thoughts

Tax filing season can feel stressful, especially if you have an expensive tax bill coming your way. However, it doesn't need to feel that way! With the help of repayment options, like a personal loan, you can possibly afford whatever tax bill comes your way. Just make sure to compare rates with multiple lenders to ensure that you're receiving the best rate possible for you.

If you think a personal loan is your best option, apply online today with Rocket Loans and see what kinds of rates you could get.

*Same Day Funding availability for clients completing the loan process and signing Promissory Note by 1:00PM ET on a business day. Also note, the ACH credit will be submitted to your bank the same business day. This may result in same day funding, but results may vary and your bank may have rules that limit our ability to credit your account. We are not responsible for delays which may occur due to incorrect routing number, account number, or errors of your financial institution.

Rocket Loans does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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Matt Cardwell

Matt Cardwell is Editor-in-Chief and leads the Rocket Publishing House at Rocket Mortgage. During his nearly 15 years with Rocket Mortgage, Matt has occupied a diverse array of Marketing leadership roles, including leading and growing the company’s early digital and internet marketing efforts; Vice President of Marketing; Director of Social Media and Director of Business Channel Strategy.