roll-over of loans

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Allowing borrowers to renew loans when they fall due for repayment, rather than actually paying them off. This is common in two cases. In many cases the loans have been used to finance profitable transactions, such as buying goods for resale: the borrower could repay the loan, but has good prospects of profit from similar further transactions if the loan is renewed. In other cases the borrower cannot repay the loan, and the lender has the choice of rolling over the loan or writing it off as a bad debt, with adverse effects on their own accounts. In such cases there is a strong temptation to roll over the loan, especially if there is some prospect that the borrower will eventually be able to repay it.

Subjects: Economics.

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