Rolling loans, or what?
Taking another consumer loan to pay off the first commitment and then the next one to give back the previous one over and over again is the easiest way to describe the phenomenon of rolling. The situation results from the inability to pay the amounts due within the period specified in the contract. In the case of a bank, it is usually taking another loan. In turn, the loan company allows its client to repeatedly extend the repayment period, i.e. to constantly postpone the date of donating money. In loan companies, it is usually possible to extend the loan for another 7, 14 or 30 days. What’s more, this service can be used repeatedly.
Extending a loan by way of excessive debt
Each extension of the loan is an expense of a few to several percent of the loan’s value. It happens that such a process lasts even several years. At this time, the financial institution has a steady profit from the fees charged for giving the borrower additional time, and the client increases his debt level, which is still increasing due to accrued interest and costs associated with a convenient (as it might seem) solution.
Rolling a loan – how to avoid it?
To avoid excessive debt arising from rolling over the loan, we still need to carefully analyze what amount and repayment period will be safe for us at the stage of considering the commitment. Safe, i.e. corresponding to our current financial capacity. Therefore, before submitting your loan application, you should compare your expenses with your earnings (it’s best to make a balance sheet for the next two months). In addition, it must be taken into account that over the repayment period, situations may occur that require reaching deeper into the portfolio. The next step after receiving the money is to ensure timely repayment. It’s best to set a day to pay back around the due date. You can also pay earlier if additional cash flows.
Rolling over loans is to be curtailed by the so-called Sejm adopted on 10 July 2015 anti-usury act. Pursuant to the new regulations, a non-interest cost limit is to be introduced (in total, they may be up to 55% of the loan value), which, in addition, in the case of several loans taken out within 120 days in the same company, will only charge fees from the first commitment given. Thus, the roll-over of the loan will become a non-profit venture.