Posts Tagged ‘Virginia payday loan laws’

What Virginia Payday Loan Laws Are Doing To Decrease Predatory Lending?

Virginia claim to have taken certain steps in order to protect the interest of the borrowers of short-term cash advances that are often advertised as easy loans but often end up becoming a nightmare for those who take it. There are definitely some great features that these types of lending programs have to offer, such as simple eligibility requirement, no credit checking (even people with bad credit can qualify), fast approval, instant money, and little or no paperwork at all. But, despite all these great features, the reason why these programs are often looked as predatory lending is that the lenders charge an unreasonably very high rate of interest and other fees. Things become horrible when the loans keep rolling over because of non-payment. You can imagine the horror of the situation with the very fact that these loans often get doubled (or even more) within just a two-month period. Lets have a look at the different provisions applicable in Virginia in order to protect consumers in this regard.

Duration And Extension

As per Virginia payday loan laws, short-term cash advances must be given for a minimum period of at least fourteen days (two pay periods). The laws do not say anything about the maximum repayment period, but it strictly prohibits rolling over or extension of loan. It means if you borrow an advance for a period of one month and if you fail to make the repayment within the set due date, the loan amount will go directly into collections. Lenders cannot renew the loan for another month. This provision is crucial in a sense that it makes sure that the debt does not grow fast with every passing month.

Interest Rate And Other Charges

The interest rates that payday lenders can charge in the state of Virginia is only 36% per annum, which is definitely a welcome move for the consumers. But, the bad news is that lenders are allowed to charge an unreasonably high origination fee, which can be as much as 20% of the actual amount you borrow. Besides that, certain other charges may also be applicable, including an insufficient fund fee of $25 for a returned check and $5 for verification. These Virginia payday loan laws are obviously favorable for the lenders. Borrowers often end up paying interest and fees at the rate of over 600% per annum. You will in general be paying over 1.5 times of the actual amount you borrow for just a couple of weeks.

The Maximum Amount A Person Can Borrow

Virginia payday loan laws have different provisions for secured and unsecured payday cash advances. Though in most other states, this type of lending programs are usually unsecured, but in Virginia, you have also an option to take cash advances by putting your car or home as collateral against the amount of money you borrow (though not recommended at all). If it is an unsecured advance, the maximum amount that can be lent is $500, but there is no such limit if it is a secured loan, such as the one where you use your car title as collateral. Like many other states, you cannot have more than one loan at a time. You can take another advance at least one day after repaying the existing loan in full. Besides that, if you have taken five consecutive advances, you will have to wait for at least 45 days before you qualify for another short-term cash advance. Since the rollover of these loans is not allowed, you may be offered an installment plan to make the repayment. In that case, the laws require you to wait at least 90 days before you enter another such loan agreement.

Overall, it is quite evident that payday cash advances in this state do not make a wise financial decision at all, as have nothing much to protect the interest of the borrowers. You are strongly recommended to avoid these loans and work on better alternatives.

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