Loan extension (rollover)
A loan extension, or rollover, is an agreement to move a loan's repayment date later, usually in exchange for paying the interest or a fee accrued so far.
In plain words
An extension is common in short-term lending. The due date arrives, and the borrower cannot repay the full sum. Instead of going overdue, they pay the interest accrued so far, or a fixed fee, and get a new date, for example 14 or 30 days later. The principal stays the same, and interest starts accruing again.
How it looks in practice
A borrower took 500 for 30 days. On day 30 they owe 500 plus interest of 75. They pay 75 and extend for another 30 days. After the second month they again owe 500 plus 75. If this repeats four times, the borrower has paid 300 in interest and still owes the full 500.
Why it matters to an owner
Extensions keep a loan formally current and bring steady income, and for a borrower with a short, honest delay they are a fair tool. Used well, an extension is better than a missed payment for both sides. But a portfolio full of repeat rollovers is a warning sign: it looks healthy in DPD terms while a growing share of clients cannot actually repay.
Common risk
Treating extensions as normal revenue and pushing them. A client stuck in a chain of rollovers tends to end in default anyway, often with complaints and disputes. Many countries limit the number or cost of extensions, so the rules should be checked with a lawyer. Internally it helps to track how many loans are on their second, third and later extension, and to offer a real repayment plan instead of another rollover.
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