In the article The Payday Loan Rollover Explained. Rollovers are arguably the most misunderstood features of payday loans. A rollover occurs when the borrower uses cash advances to pay for each other. Instead of repaying a loan within the initial term, another loan is taken to cover the balance. After doing this several times, some borrowers find themselves with a total interest payment that exceeds their initial loan amount.
While rollovers are dangerous for some consumers, they product payday lenders from insolvency. These lenders have been vilified by some consumers and advocacy groups, while others believe they provide a necessary service. People who need a small amount of money quickly can get it without having to complete mountains of paperwork or endure a credit check.
If they repay the money as agreed, the process is relatively painless. The interest rate is limited due to the short-term nature of the borrowing. For example, a $100 loan may have a fee of $15, which includes interest. It is when the loan is rolled over that things become expensive. Rolling over this loan three times will result in a $60 charge for interest and other fees. That is more than half the amount of the initial loan.
Consumers should shop for the lowest rates when considering these cash advances. They should learn more about what a rollover involves before they sign on the dotted line. Nearly all financial experts advise against using this financing if the loan cannot be repaid by the next paycheck. Borrowing from family or friends or saving money until the purchase can be afforded is a better approach.
A loan comparison site helps consumers quickly find the lowest interest rate available. The individual can then apply directly to the chosen lender, with no requirement of faxing any supporting documentation. Loan approvals are sometimes issued immediately and funding may take place within hours.