Rolling the loan – what is it and what is it?
Many consumers, which is not difficult to predict, re-bought the loan extension service, increasing the amount of the obligation to the lender. And it is the practice of continuing to extend the loan with the payment of appropriate fees, which is usually referred to as the rollover of a loan.
The situation on the loan market has improved due to the so-called anti-usury law. However, the problem still exists – only on a smaller scale.
What changed? The anti-usury law restricts the maximum amount of costs that can be imposed for extending the repayment date – up to 25% of the loan value. As a result, many companies have completely withdrawn this service from their offer. Others began to provide it under refinancing. Subsequently, they have adapted to the new regulations, limiting, for example, the availability of the service (only once) or further providing it with unlimited payments.
Rolling the loan – the everyday life of the loan market
Therefore, although the cost of extending the loan is now a bit smaller, it is still possible for many lenders to fall into the trap of rolling the loan. And this despite tightening the control of clients’ creditworthiness to avoid the phenomenon of lending money to precarious people.
The problem continues all the time. Many do not realize it, approaching the issue of continuing to extend the repayment period as a salvation from potential problems. Indeed, in the perspective of several months or even years, the continuous purchase of additional time to repay the loan is therefore a permanent incurring of additional costs. After adding up, they can be even more than the original financial commitment!
Why is rolling a loan dangerous?
The basic problem that is associated with rolling costs of the loan is, first of all, the mentioned – deepening of your debt to the loan company. If, despite buying extra days to collect money to be returned to the loan company, this has not been done – for fear of recovery, many buy the service once again.
When the situation repeats, the financial arrears against the lender only grow – and the consumer does not gain anything. He only distances himself from the spectrum of debt collection, which paradoxically becomes more and more inevitable. The service of extending the repayment date may turn out to be just as dangerous a tool for people with a bad financial situation, like taking a short time.
You realize your unstable situation, but you count on the rescue board?
Taking into account the above-mentioned information, it is worth to be aware of the risks usually brought by the advertised service of extending the loan term or refinancing.
If you have good credit standing, however, it is aware of the unstable financial situation – under no circumstances can you consider the service of extending the repayment term for collateral “in case of”. The way to fall into the trap of rolling a loan (and a false sense of avoiding troubles) is then simple. What is worse, the situation may result in widening the debt area or replacing one financial trouble with another.
Many borrowers often take short-stays in other companies to pay back any arrears of the existing institution. Such a situation may in turn lead to falling into a debt loop, i.e. having debts in several loan companies.