Paying back what you borrow — it’s the pledge you make any time you take out a payday loan or cash advance, but you can’t always live up to that promise.
Sometimes, life throws you a curveball. You might wind up having to make another unexpected repair, or you lose hours at work. Maybe an accident lands you in the hospital and makes it impossible to stay on top of your bills.
If you can’t make your payment, some payday direct lenders allow you to roll over your loan. This process pushes out your due date, but you should only consider it in emergencies. Keep scrolling to learn more about what happens when you choose this option.
What is a Roll Over?
A roll over is a special extension of your terms. If you can’t pay what you owe by the due date, you may pay a fee to renew your contract and give you more time to make a payment. This saves you from looking for an advance to help you pay off the original loan, a strategy most financial experts don’t endorse.
While rolling over a payday loan may defer your due date, it doesn’t reduce the amount owing. You’ll still have to pay back the outstanding principal from the original term. Except now, you’ll also have to pay the roll over fees, and you might even have to pay late fines.
How Does it Work?
Typically, you have to pay the original fees of your advance before you qualify for a renewal. Once you pay off the outstanding fees, your direct payday lender will extend your due date.
In most cases, the extension will last as long as the original term. So, if you’re given two weeks to repay what you owe the first time around, the extension will give you an extra two weeks to drum up with the funds.
Once this deadline arrives, you’ll have to repay your principal plus another fee for renewing your advance.
How Much Does it Cost?
There’s no one-size-fits-all fee. Like any charge involved with borrowing money, roll over costs are set by individual direct payday lenders. You may end up paying less or more than other borrowers depending on a lender’s policies, your credit score, or even your location.
Geography counts toward your renewal experience because each state sets its own laws regarding payday loans. Some may impose a hard limit on how much direct lenders can charge you, while others may outlaw the practice altogether.
Rolling over is never a good idea. Due to the short terms of the average payday loan, an extension doesn’t give you a lot of time to generate the cash you need. There’s a good chance you might fail to pay by the new due date and have to roll over again.
Each time you do this, you wind up paying more. According to the Consumer Financial Protection Bureau, most payday borrowers renew their loans so frequently they end up paying more in fees than the original principal.
To save you from falling into this debt trap, consider researching installment loans as an alternative. While they may still be available with a bad credit score just like cash advances, they offer a longer repayment term from the start, potentially saving you a roll over fee.