Should I take a personal loan to pay taxes I owe to the IRS?

IRS payment options for unpaid taxes: Short-term payment plan (under 120 days): available if you owe less than $100,000. No setup fee. Interest and 0.5% monthly penalty continue until paid. Long-term installment agreement: available for amounts up to $50,000. Setup fee: $31 online (low-income waiver available) to $225 by mail. Monthly penalty: 0.5% of unpaid balance. Interest: federal short-term rate + 3% (approximately 8%-10% total in 2026). Offer in Compromise: settling for less than full amount. Complex, requires demonstrating inability to pay. Penalty abatement: first-time penalty abatement is available for taxpayers with a clean penalty history.

Personal loan vs. IRS installment plan: IRS plan: ~10%-12% effective annual cost (interest + 0.5%/month penalty). No credit check. No origination fee. Does not appear on credit report. Personal loan: 8%-25% APR. Requires credit check. May have origination fee. Appears on credit report (hard inquiry, new account). For borrowers with strong credit (12% or lower personal loan rate), the personal loan may cost similarly to the IRS plan and offers the benefit of ending IRS collection activity immediately.

Why ending IRS collection matters: The IRS can file liens, levy bank accounts, and garnish wages. Taking a personal loan to pay the full IRS balance eliminates all collection risk immediately. An installment agreement pauses most collection activity but leaves the tax debt outstanding for years.

Bottom line: Run the numbers comparing your available personal loan rate to the IRS installment plan total cost. If the rates are close, consider whether getting the IRS off your back immediately (via personal loan) is worth the marginally similar cost.