Rolling Over Payday Loans
Posted on Monday, May 23rd, 2011 at 10:13 am in General Payday Loan Tips
A payday loan roll over extends the terms of your cash loan for another pay period, giving you more time before you have to start paying back your loan. In exchange for another service fee, a lender will allow you to extend the life of your payday loan by another two weeks before you have to begin paying it back again.
Because roll overs can make payday loans get very expensive very quickly, some lenders and state laws limit the number of roll overs a customer can request on a single loan. Some areas only allow a single roll over per loan, while others impose a three or five roll over limit. Other states and lenders ban roll overs entirely because of their tendency to trap borrowers in debt if they’re not careful about their roll overs.
Roll overs can affect the APR on your payday loan. Generally, if you pay off your entire loan right away, you don’t have to worry about the annual percentage rate on your loan because the lending period is so short. Once you start rolling it over from month to month, the APR starts coming into play. Your lender will likely require you to pay a new service fee every time you roll your loan over, and those extra fees can stack up fast. Before you know it, you’re paying more in fees for roll overs than the amount your original loan was for!
Roll overs can be helpful if you need a little extra time to pay off your cash loan. If this week’s paycheck wasn’t enough to cover the full amount, you can set aside half your payment this week, pay the service fee, and combine what you saved from this paycheck with the next one to pay off your loan in full on the following payday. However, if you’re rolling over your loan to use your payday loan as a secondary source of income to make ends meet, it’s time to seek some financial help from a credit counselor. You’re costing yourself more money than you need to in the long run to maintain your simple payday loan.
If you really need a roll over, by all means consider one. But ask your lender about extended payment plans too, to keep your interest rate down and get out of debt faster.
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