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When does it make sense to take out a personal loan to pay your taxes? One situation when it could make sense to take out a personal loan to pay your taxes is when that loan would be cheaper than entering into an IRS payment plan. The IRS offers several different plans for those who can't pay their taxes on time. That includes a short-term plan for those who'll be able to pay what they owe in 120 days or less. There's also a long-term plan that allows you to enter into an installment agreement and pay over more than 120 days. If you enter into any payment plan, you'll owe accrued penalties for being late. You'll also owe interest on your unpaid balance. The rate, which equals the federal short-term rate plus 3%, changes quarterly. If you opt for a long-term plan, you'll also owe a $31 setup fee if you enroll online or a $107 fee if you set up your plan in person. If you can qualify for a personal loan with no origination fees and an interest rate below what the IRS charges, using a personal loan could save you money and could make a lot of sense. However, you should bear in mind that some lenders have minimum amounts for personal loans. If you'll only owe a few hundred dollars to the IRS, you may not be able to find a lender willing to lend you that small of an amount.