Yes, you are able to renew your payday loan. In fact, it is incredibly common to renew your payday loan. Statistics have shown that in the US, borrowers, on average, receive 8 to 13 payday loans per year from a single payday lender.
In fact, if you have been shown to be a reliable borrower, and have made payments from previous loans on time and in full, you may even be eligible for more generous repayment terms, and a better rate than you were the first time you took out a loan.
How Do I Renew My Payday Loan?
Payday loan renewal is when a borrower takes out a payday loan with a lender, and then takes out another one with the same lender once the previous payday loan has expired. A loan ‘expires’ when it has been paid-off in full. Put simply, a payday loan renewal is when you take out another payday loan once the balance of the previous one has been fully paid-off. The renewal is usually for the same amount as the previous loan.
Payday loan renewal is incredibly common. Indeed, 4 out of 5 borrowers renew their payday loan. This can be for a variety of reasons. Perhaps the first loan was not enough to cover the anticipated expenses. Or perhaps the borrower was hit with another unexpected bill, such as an auto repair bill, medical expenses, urgent house repair or a vet bill.
Can I Borrow a Larger Amount When I Renew My Payday Loan?
Yes, you are able to borrow a higher amount when you decide to renew your payday loan, also known as a rollover. For first-time borrowers, lenders generally lend amounts of $500 or less, particularly if the borrower in question has poor credit history (see loans for very bad credit). This is because the lender risks their capital when they lend, and they want to mitigate the risk of a borrower defaulting on a large loan amount.
However, if the borrower shows the ability to pay-off their first loan in full and on time, the lender will be more willing to provide that borrower with a larger amount if they choose to renew their loan. In fact, the borrower might even qualify for a better rate when they renew their loan, since they have shown to be a strong candidate in their initial loan.
How Can I Ensure That I Qualify to Renew My Payday Loan?
It is not guaranteed that your payday loan will be renewed.For example, if you have shown to be an unreliable borrower who cannot repay a loan on time and in full, a lender will be reluctant to lend to you again. However renewal is a pretty common practice in the lending industry. In fact, 4 out of 5 payday loans are renewed every year.
While it is not guaranteed that you will be approved for loan renewal at a better rate, there are steps you can take while paying off the original payday loan that will make you far more likely to get approved for a renewal. These include:
- Ensure that you declare any increase in income, if this arises, in order to qualify for a better rate.
- Make sure that you pay any other outstanding bills (such as utility bills, rent, auto bills) on time.
- Ensure that you make your payday loan repayments on time and in full.
- Improve your average bank balance by adding to your bank balance whenever it is possible
- Make sure that your credit utilization ratio is kept as low as possible by paying off lines of credit early.
- Keep an eye on both your credit score and report to make sure that no errors or mistakes are added to your accounts (and take steps to correct the record if/when those errors do come up.)
Ensuring that you are taking these steps regularly will help you get approved for a loan renewal. They are also good financial practices to incorporate into your life anyway.
Why Would I Need to Renew My Payday Loan?
There are several reasons that you might decide to renew your payday loan. For instance, you may want to consolidate previous debt that you have accrued. You also may decide to renew because, as mentioned above, you have been hit with another unexpected expense that you might need help to cover.