Many people may end up owing money at tax time, leading to a scramble to cover unexpected tax bills. Borrowing the needed funds through a personal loan is an option, but it may not be the best choice as there are other less expensive options available.

Taxpayers could owe money due to being self-employed, experiencing a major life change, or selecting incorrect withholdings on their W-4. Personal loans are unsecured, allowing borrowers to use the funds for various purposes like paying taxes, consolidating debt, or making large purchases.

Personal loans have amounts ranging from $1,000 to $100,000 with terms between two and seven years. Loan approval and fund disbursement are quick, allowing borrowers to repay their tax bill through monthly installments over several years.

While using a personal loan to pay taxes can help avoid penalties and interest, there are drawbacks to consider such as the need for good credit, origination fees, and the overall cost with added interest. It’s important to have a repayment plan in place to avoid worsening financial issues.

Consider alternatives like using a credit card for small tax bills or opting for an IRS payment plan for larger amounts. An IRS offer in compromise may be an option for those facing significant financial hardship. Reviewing withholdings and making estimated quarterly tax payments can help avoid future tax surprises.

Read more at Yahoo Finance: Can I use a personal loan to pay taxes?