Avoid payday loans. Start saving a small amount out of each paycheck to build an emergency fund for your family. However, since you already have payday loans that you cannot repay in a timely manner, the best solution would be for you to borrow the funds needed to repay these loans from a conventional lender or a family member or friend. Converting your payday loans to a conventional loan should allow you to repay the loans within a reasonable time frame. If you cannot borrow the funds to repay the payday loans, you may want to make a payment each month to pay down the balances.
Virginia payday loans
The Commonwealth of Virginia regulates payday lenders. The State Corporation Commission licenses payday lenders, and keeps a list of such lenders on its Regulated Institutions page. I am not aware of any current regulations in the Commonwealth of Virginia allowing borrowers to pay $5.00 per month on unsecured personal loans or pay-day loans to prevent the loans from going into default.
If you read in your loan agreement that you can make payments of only $5 per month to keep your loans out of default, you should refer back to the agreement and contact the lender to request that it allow you to make reduced payments until after the holidays. However, I have never seen a loan agreement which allows consumers to make such reduced payments on a loan, so I think that you may have misunderstood the repayment regulations. I encourage you to review the regulations in question to make sure that you correctly interpreted the laws relating to these loans.
From the information I have reviewed, the Commonwealth of Virginia allows payday lenders to proceed with collections on any loan that is not paid in full in a timely manner, including charging a fee of $25 on any returned check. However, if you simply cannot afford to pay the loans during the holidays, you may want to consider placing a stop payment on the checks you gave to the lenders; while you will likely be charged a fee, you should be able to pay the loans and fees after the holidays. To learn more about Virginia's laws regarding payday lending, I encourage you to visit the Consumer Federation of America Virginia page.
As of this writing, Virginia law allows payday lenders to operate and exempts them from the usury laws which apply to many other lenders. To keep payday lenders in check, Virginia has established a separate set of regulations that apply specifically to payday loans, allowing these lenders to charge a maximum of 15% of the total loan amount as a finance charge, or $15 per $100 borrowed. On a two-week payday loan, this 15% finance charge means that borrowers are paying the equivalent of 390% annual interest; on a one week loan, it translates to a 780% annual rate. In addition to its regulation of finance charges, Virginia requires that payday lenders allow at least one week for borrowers to repay their loans, and caps the total amount of a single payday loan at $500.
Virginia payday loan repayment
Virginia also does not allow borrowers to refinance, or "rollover," their payday loans, a policy that can seem unjust to borrowers who are struggling to repay their payday loans in a timely manner, but which is in the consumers' best interest in the long run. In those states that do allow for rollover of payday loans, the lender can charge a new finance charge each time the loan in refinanced, which can easily turn into hundreds of dollars in fees for borrowers who cannot afford to repay their loans.
In Virginia, if you cannot repay your payday loan by the due date, the lender can declare your loan in default and start charging you 6% annual interest on the unpaid balance until repaid. Also, if the lender finds it necessary to pursue legal action against you, they can add collection costs and attorney's fees to the loan balance.
Since Virginia caps the interest rate charged on defaulted loans at 6%, you should be able to effectively pay down the loan with regular payments; you should contact the payday lender to try to work out repayment terms that will work with your budget.
Bills.com also offers more information on the Payday Loan Information page, and has answered reader questions about payday loans in California, Florida, Illinois, Massachusetts, Missouri, New York, Texas, and Virginia.
If you do not repay a payday loan, the payday loan company has several legal remedies, including wage garnishment, levy, and lien. See the Bills.com resource Collections Advice to learn more about the rights of creditors and debtors.
I hope this information helps you Find. Learn & Save.