With an installment loan, you get a lump sum of money to pay back through multiple payments. In Virginia, limits vary by lender and the legal loan category. Identify both, and evaluate the amount you would receive, payment schedule, and the true cost of the loan.
Which Virginia lending framework covers the offer?
Some banks and credit unions, as well as licensed consumer finance companies, may offer personal cash loans. Lending practices of banks and credit unions are governed by different laws from Virginia’s consumer finance chapter. A product offered as an installment loan is not necessarily a Chapter 15 consumer finance loan.
For a Chapter 15 loan, the written agreement must provide that the law of that chapter governs. These loans cannot be secured by a lien on real property at the time of the loan, but a judgment lien may be created later. An unsecured loan doesn’t pledge property; a loan that is secured by other permitted collateral, may, upon default, expose the pledged property to risk.
A loan matching service collects and forwards information. The creditor named in the agreement makes the loan and determines the terms. Before disclosing sensitive information, identify who may receive it and determine the company that would be responsible for the offer.
Limits for licensed consumer finance loans
The limits below pertain to Virginia's consumer finance loans. These are legal limits; they do not indicate the advertised loan offers, or that a lender will approve these loan amounts.
| Loan feature | Rule for covered loans |
|---|---|
| Loan amount | $300 to $35,000 |
| Repayment term | 6 to 120 months, with six or more successive payments of substantially equal size |
| Contract interest | Calculated at no more than 36% annually, on unpaid principal rather than added upfront or compounded |
| Processing fee | No more than the greater of $50 or 6% of principal, with an overall $150 ceiling. |
| Late-payment fee | Up to $20 if the lender has not received and applied the full payment within the 10-day period following its contractual due date; only once for that scheduled payment, and only if stated in the contract. |
The 36% limit refers to the contract interest rate limit, not an all-in APR limit. The APR includes all covered costs of a financing and may include a processing fee. Thus, APR and interest rate may vary. Look at the dollar finance charge and the total payments, along with the interest rate and APR.
Examples of hypothetical processing fees: For a $2,000 covered loan, a processing fee of 6% would be $120. Since $120 is greater than $50, it would be capped at $120. The lender may charge a processing fee of $120 or less. If the processing fee is withheld from the $2,000 loan, you would receive $1,880, and the agreement has to explain the balance you are repaying and other fees.
A separate category: Virginia short-term loans
Chapter 18 covers a separate short-term loan category, with a $2,500 maximum and a usual repayment period of four to 24 months. For a term shorter than four months, compare two income-based amounts: 5% of verified monthly income before deductions (gross income) and 6% of verified monthly income after deductions (net income). The total payment due each month may be no higher than whichever amount is larger.
Under these rules, simple interest is limited to 36% per year. A separate maintenance charge may be added each month, but its maximum is found by comparing $25 with 8% of the amount originally borrowed and choosing the smaller figure. Other statutory cost limits also apply. The added maintenance charge can make the disclosed APR higher than the simple annual interest rate. The Chapter on short-term loans has its own cancellation and payment provisions. Its fee rules do not carry over to Chapter 15, and Chapter 18 does not cover every small installment loan.
Verify the lender and prepare for its review
State Corporation Commission’s resources allow the public to verify the legal name of a creditor and ensure the creditor has the appropriate authorization. Company Search covers consumer finance and short-term lenders and Virginia-chartered banks and credit unions. If you cannot confirm a company’s status, you can always reach out to the regulator for help.
A lender may request various types of documentation regarding your identity, income, employment and bank accounts. The credit standards and document requirements vary. Determine whether a credit inquiry will be considered soft or hard before consenting; a hard inquiry can negatively affect your credit score. Approval and final pricing are not guaranteed even with a completed request or preliminary estimate.
Payment dates and early payoff deserve a closer look
Contracts for Chapter 15 loans generally provide for substantially equal monthly principal and interest payments. An initial payment period of up to 45 days, and a larger first payment to cover that period, is allowed. Be sure to check the due date of the first payment, as it will not necessarily be the same as the due date of the subsequent payments.
Ch. 15 lenders must allow a borrower to pay off the loan in full or in part equal to one or more full installments. Payments may first be applied to amounts already due. For an explanation of payment application, request a dated payoff quote.
According to the Chapter 15 rule on processing fees, if the entire principal plus accrued interest and applicable fees are paid within the first 30 days, a rebate is required, less an amount not greater than $50 or the actual fee, whichever is less. For a processing fee of $120, a rebate of at least $70 would be due if the conditions of the rule are satisfied.
Read the loan agreement for collateral, payment authorizations and missed-payment consequences. Test its schedule against reliable income and essential bills. If a payment may be missed, contact the lender before the due date and get any agreed change in writing.