Are Property Tax Loans a Good Idea? Pros and Cons of Property Tax Loans

While property taxes are no one’s idea of a good time, if you don’t pay them, there are serious consequences. Once your taxes become delinquent and you’ve been hit with penalties, your tax bill can quickly escalate to a seemingly unmanageable amount. While there are many options to pay a delinquent property tax bill, property tax loans are a common solution. But are property tax loans a good idea? Let’s review the pros and cons of property tax loans to see if using one is the right fit for your situation.

What Are Property Tax Loans?

Property tax loans are specific loans designed to help homeowners pay delinquent property taxes. By design, the homeowner doesn’t directly receive the funds. Instead, the property tax lender directly pays off your taxes at the county tax assessor’s office for you.

The Pros of Property Tax Loans

You Avoid Foreclosure

When you are approved for a loan, the funds are immediately used to pay off any delinquent tax bills at your local tax assessor’s office, halting any foreclosure proceedings.

They Provide Immediate Relief

While some loans take weeks or months to be approved, property tax loans are relatively quick. You get relief for your unpaid taxes usually within just a few days.

Flexible Repayment Terms

At Johnson & Starr, the property tax loans are designed to keep you in your home; therefore the repayment terms are typically affordable and flexible to fit your lifestyle.

No Impact to Your Credit

Unlike traditional loans, property tax loans aren’t based on your credit and won’t affect your credit score. Wondering if tax liens affect your credit score? Learn more here.

Low Interest Rates

Tax penalties add up quickly and can be as high as 47% each year. The interest rates on a property tax loan in comparison to tax penalties alone, may make it an appealing option.

The Cons of Property Tax Loans

Interest and Fees

Property tax loans come with their own interest and fees. While these costs are much lower than penalties for unpaid taxes, they still represent an additional financial burden that borrowers need to consider carefully.

Risk of Default

While a property tax loan will keep you from foreclosure, if you don’t pay the loan based on your repayment terms, you’ll end up in default. Defaulting on any loan has its own list of consequences including affecting your credit.

Limited Availability

Not everyone qualifies for a property tax loan. Every loan company has their own specific criteria to verify your eligibility.

Potential For Long-Term Debt

Depending on the amount of your tax bill, you are still financing a debt that can accumulate and add up long term if you continue to face financial difficulties.

Alternatives to Property Tax Loans

Payment Plans

Many counties offer payment plans at their tax assessor’s office for those who can’t pay property taxes in one lump sum.

Home Equity Loans

If you have equity in your home, you can use this to obtain a loan to cover your tax bill. These types of loans require good credit, are based on a credit check and your home’s value and have steeper consequences if you default.

Credit Cards

Tax debt can be placed on preexisting credit cards, but interest rates may be similar to tax penalties, so the debt isn’t truly eliminated or reduced.

Johnson & Starr Can Help

Johnson & Starr offers Texas property owners fair, flexible, and easy-to-understand loans that relieve the stress of burdensome past-due property tax bills. If you’re uncertain whether a property tax loan is the right solution for you, contact us today, and we’ll work together to create a plan that puts you back in control of your property taxes.