When you have unplanned expenses and are on a tight budget, a payday loan could be helpful. Payday loans, a type of short-term loan, give you quick access to money when you need it. Read on to find out about the laws in Virginia and everything else you should know about how payday advances work.
Virginia has a number of laws to regulate payday loans and installment loans, otherwise known as short-term loans. Before you borrow, ensure your lender is legit — and learn more about the laws in place to keep you safe.
Virginia short-term loan laws
Virginia Title 6.1, Chapter 18 governs short-term lending in the state. In 2021, Virginia updated these laws to further regulate payday loans and installment loans.
|Max loan amount||$2,500|
|Annual interest rate||Up to 36%|
|Monthly maintenance fee||8% of original loan amount, up to $25|
|Loan term||4 to 24 months|
Cooling-off period in Virginia
Virginia has set regulations on how long you need to wait between loans. The exact timing depends on your previous borrowing history.
The standard cooling-off period is 24 hours. However, lenders in Virginia are prohibited from offering loans if you currently have a payday loan or have taken out five payday loans in the last 45 days.
Lenders are also prohibited from offering loans if you entered an extended payment plan in the last 90 days or took out an extended term loan in the last 150 days.
Note that you can only have one payday loan in Virginia at a time.
Right to cancel
Virginia law states that you can cancel your loan before the close of the business day after you borrow. To do this, you’ll simply need to return your loan funds to the lender. Your lender can’t charge you any fees for canceling.
How much do short-term loans cost?
Lenders are allowed to charge an annual interest rate of up to 36% and a monthly maintenance fee of 8% of your loan amount, up to $25. The total cost of your loan will depend on how much you borrow and your loan term.
In addition, lenders can charge a late fee of up to $20 and a nonsufficient funds (NSF) fee of up to $25 if you aren’t able to make a payment or your check bounces.
How to apply
When you visit the lender’s storefront, you’ll need to bring proof of employment, proof of your address and a blank check. You’ll also need to provide your Social Security number and be willing to fill out an application that asks for personal details.
Once you’re finished, an employee will process your application and you’ll know within a few hours if you’ve been approved for the loan.
Title loan laws in Virginia
Virginia has a number of regulations in place to protect borrowers, including limits on how much you can borrow and late fees:
- Maximum loan amount: No more than $2,500 or 50% of the value of your vehicle
- Interest rates: Up to 36% per year
- Loan terms: Six months to two years
- Monthly maintenance fees: No more than 8% of the loan amount, with a maximum of $15
- Late fees: No more than $20
- Rollovers and extensions: None allowed
Returning your title
When you repay your title loan in full and have closed out your loan, your lender is required to:
- Mark your original loan agreement as paid or canceled
- Terminate its lien on your vehicle’s title
- Return your vehicle’s title to you
If you run into trouble getting your title back, contact the DMV in the state your vehicle is registered. If problems continue, contact Virginia’s attorney general to file a complaint.
Repossessing your vehicle
Your lender must give you a written notice 10 days in advance before it repossesses your vehicle. This notice must state:
- The principal of the loan
- The interest due
- That you can avoid repossession by paying back the loan in full
Once your vehicle is repossessed, the lender can no longer charge additional interest.
Selling your vehicle
After repossession, your lender must give you at least 15 days’ notice of its intention to sell your vehicle. This notice must include:
- The principal of the loan
- The interest due
- The date and time your vehicle might be sold
- A list of reasonable expenses of repossession
Your lender may not charge you for storage fees after repossession.
You can pay off your loan at any time before the sale to get your vehicle back. If you’re unable to pay your lender, it can sell your car. One of two things will happen after your lender sells your car, depending on the payoff amount.
- If the vehicle was sold for more than the payoff amount your lender must give you any excess money from the sale. For example, if you owed $4,000 to your lender and your vehicle sold for $5,000, you would receive the leftover $1,000.
- If the vehicle was sold for less than the payoff amount your lender cannot collect any additional money from you. For example, if you owed $5,000 on the loan but your vehicle only sold for $4,000, you would not owe your lender the extra $1,000.
What should I consider before taking out a loan?
Payday loans can be expensive if you don’t repay them right away — and car title loans in Virginia can be costly. Because of this, they should be used as a last resort.
If you have ongoing financial issues, you could apply for one of the many assistance programs in Virginia. Programs like Energy Assistance, the Supplemental Nutrition Assistance Program (SNAP) and 2-1-1 Virginia can all be helpful when you’re trying to balance your budget.
A payday loan can help you afford unexpected expenses between paychecks. And knowing the laws will help you avoid disreputable lenders. Always be sure you can repay your loan, and don’t hesitate to ask questions or report illegal behavior when you see it.
Frequently asked questions
A few more rules and regulations surrounding short-term loans in Virginia.
How often can I get a repayment plan?
There is no limit to how often you can use a repayment plan. Lenders can’t charge you for this, but you must repay the outstanding loan amount in four equal installments within a 60-day period. But if you do choose a repayment plan, you won’t be able to borrow a new payday loan for 90 days.
Is there a cooling off period between loans?
Yes. In order to protect consumers, Virginia has different cooling off periods depending on how many loans you’ve taken out.
- You must wait one day after payment of your loan.
- You must wait 45 days after your fifth loan within a 180-day period.
- You must wait 90 days after going on a payment plan..
Where can I file a complaint about a payday lender?
Contact the Virginia Bureau of Financial Institutions. Or, file a complaint with the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC).
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