But taking out multiple loans is not the only way that people get caught in the payday debt cycle. Many of these predatory lenders offer something called “rollover” to their customers. This allows the borrower to extend the loan for an additional term, so long as they pay off the original interest owed. In the case of that $300, 14-day loan that initially cost Bill $60 in the previous example, this would mean paying back the lender only the $60 in fees interest in order to score an additional 14 days.

Sounds like a good deal, right? Wrong. Because that additional 14 days doesn’t come free of charge. Instead, it comes with an additional $60 charge. This means that the borrower is now paying twice as much for the same loan and only gets an extra 14 days in return. Rollover drastically increases the cost of borrowing and can trap borrowers in a cycle where paying the loan off in full becomes increasingly difficult.

There are several different ways for the debt cycle can come about, but they all lead to the same place: financial ruin.

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