What is a Payday Loan Rollover?
A payday loan ‘roll-over’ is a term used to describe taking out a new loan to repay an existing loan. The reason people opt for a loan ‘roll-over’ is that it extends the term of the loan.
A payday loan is designed to be repaid by the borrower’s next pay period- usually 14 days. Sometimes, however, borrower’s just can’t repay it in full upon the due date. Life happens, bills come up and there are times when 14 days just isn’t enough time to come up with the extra cash. This is especially common in today’s economy. The lender offers an additional cash advance and rolls over the previous loan into the new loan, essentially giving the debtor more time to repay as well as more money.
The downside to rollovers is that they can quickly spiral out of control. In addition to the loan principal, borrowers are also responsible for increased interest fees. Therefore, as a general rule of thumb, try to avoid cash advance loan rollovers whenever possible. You’ll really save yourself a lot of money in doing so.
National Foundation for Credit Counseling