Avoid Getting Stuck in Payday Rollover Fees

One of the common mistakes people make when taking out a payday loan is thinking that a “rollover” is the same as a loan extension.  With a loan extension, you are simply drawing out the time you have to repay the loan and possibly recalculating the interest accordingly.  A payday loan rollover is actually a completely new loan: the total cost of your first payday loan (principle, fees, and interest) are added up and rolled into a new loan.  You will have to pay the fees all over again for this new rollover payday loan.  Approximately 74% of payday loans are rollover loans.

Let’s take a look at how a rollover payday loan works:

  • David takes out a payday loan of $300 to cover a high gas bill until next week’s paycheck comes. The loan has a fee of $75 ($25 for each $100).
  • Payday comes and David doesn’t have enough to cover the total costs of the loan ($375).
  • David asks the lender for a rollover.  The new loan is now for $375 plus a higher fee for the rollover of $120.
  • David now must pay $195 to borrow $300.  If he cannot pay off the payday loan in full at his next payday, he will end up paying even more.

Before taking out a payday loan, it is incredibly important that you understand how much it is going to cost you at minimum as well as how much it could cost you.  Even if you think that you will pay off the loan on time, there are always unforeseen circumstances which may prevent you from doing so.

To avoid getting stuck in rollover debt, it is important that you make a financial plan which ensures that you can pay off the payday debt in full the first time around!  You will need to carefully add up all of your necessary expenses and also locate areas where you are spending unnecessarily.  Cut out all unnecessary expenses until the payday loan is paid off in full.  If you have other debts and bills, it is important to evaluate each of these individually and prioritize which ones need to be paid off first. You don’t get much leeway with short-term loans like payday loans so you’ll have to start budgeting right away.  With extremely few exceptions, you should never use a payday loan to pay off other debt.

Payday loans are meant to be short-term solutions for financial difficulties. If your money problem is originating from long-term problems, then a payday loan is just likely to push you into a rut of rollover costs.

Using Payday Loans to Rebuild Your Credit

If you want to repair your bad credit, you will be faced with a Catch 22: the only way to repair your credit is to take out more credit – but you can’t get new credit if you already have bad credit! Does this mean that you are stuck [...] Continue Reading…

Payday Loan Debt Consolidation: A Way Out

Payday loans are a fast and easy solution to short-term financial needs.  Even the most responsible borrowers can still experience difficulties which turn these short-term loans into a long-term financial problem.  If your payday loans are adding up or you have other loans which also need repaying, then payday [...] Continue Reading…

How to Pick the Best Payday Loan?

The internet has opened up a whole new boon for payday lenders. There are now dozens of lenders in just about every state.  Thanks to all of the competition, borrowers are finally enjoying more favorable rates and lower fees.  For people in need of fast cash though, trying to [...] Continue Reading…

Difference between Storefront and Online Payday Loans

Payday loans used to be exclusively given via storefronts where you had to go in person to apply and collect your money.  Now, most payday loans are given through registered lenders online.  There are numerous differences between storefront and online payday loans which may make one the better choice [...] Continue Reading…