Some payday lenders give borrowers the option to renew or rollover their loans if they cannot afford to pay off the loan when it’s due. However, many states limit or ban these renewals or rollovers.

If your loan is renewed or rolled over instead of being repaid in full on its due date, you are paying a fee to extend the loan due date. Renewing by paying just the fees does not reduce the principal amount you owe.

For example, on a typical payday loan, if you borrowed $300, you may owe $345 in 14 days-- $300 plus the $45 fee. If you roll over the loan, you pay only the $45 fee, and you have to repay the $300 plus another $45 fee 14 days later. That means the cost of the original $300 loan, due to the rollover, has gone from $45 to $90. If you roll over the loan multiple times, it’s possible to pay several hundred dollars in fees and still owe the amount you borrowed.

If you are having trouble paying off your payday loan, see I am having trouble repaying my payday loan.