Payday Loans in Nebraska: Are They Legal and How Do They Work?

Payday loans are short-term loans that allow you to access some of your earnings early, then pay it back from your next check. Nebraska payday lenders offer these loans to people who need cash quickly, and may not qualify for other loans based on their credit scores. 

A payday loan can help you meet a temporary financial need, but they come with certain risks. Learn how Nebraska payday loans work, and where to find alternatives. 

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Are payday loans legal in Nebraska?

Nebraska law allows payday lending, with certain restrictions. Payday loans are covered under the Delayed Deposit Services Licensing Act. Here's what current statutes allow for payday lending in the state.

• APR: State law caps the maximum payday loan APR at 36%. 

• Fees: Finance charges may not be more than $1.38 per $100. 

• Loan limits: The maximum payday loan amount is $500.

• Loan terms: The maximum payday loan term is 34 days. 

• Renewal: Payday loans cannot be rolled over or renewed. 

• Additional loans: Borrowers can't have more than one payday loan per lender at a time. 

Compared to other states, Nebraska is on the stricter side where payday loans are concerned. The limitations on loan amounts, rates, and terms are designed to protect borrowers against unfair or predatory loan practices and keep cost to a minimum. 

How payday loans work in Nebraska 

Payday loans work by allowing you to get a cash advance on your pay. Depending on the lender, you might be able to get funds as quickly as the same day, or the next business day. You pay back what you borrowed when you get your next check. 

To get a Nebraska payday loan, you generally need to:

• Be at least 18 years old

• Have steady, verifiable employment

• Own an active bank account

Lenders use your bank account to collect payment once your payday loan comes due. When you sign the loan agreement, you give the lender consent to withdraw the loan amount at a scheduled date in the future. 

Nebraska limits payday loans to 34 days; you can't renew or roll over your loan to a new term. Again, that's designed to protect borrowers. In states that allow renewals, lenders can charge a fee to push your loan due date out. You can get some breathing room before you have to pay in full, but those fees can add up if you're renewing the same loan multiple times. It's even possible to pay more in renewal fees than the original amount you borrowed. 

The risks and dangers of payday loans

Payday loans are generally considered to be a risky way to borrow for a few reasons. How risky these loans are is often determined by how lenient or strict payday lending regulations are in your state. (Note: Some states don't allow payday loans at all.)

The biggest payday loan risks include:

• High interest charges. Getting a payday loan in a state with no rate cap could be pricey. For example, say you get a $500 loan with a two-week term and a $15 fee for every $100 borrowed. That equates to a 391% effective APR, according to the Federal Trade Commission (FTC).

• Debt trap. Payday loans can put you in a debt trap if you continually renew your loan, or take out multiple loans to make ends meet. You may look to payday loans for relief if you're struggling financially, but they can end up compounding your problems. 

• Overdraft fees. Since you have to give the lender access to your bank account to repay the loan, you could risk overdraft fees if there isn't enough money in your account to cover the amount. State laws allow some lenders to charge insufficient (NSF) funds fees as well. 

A payday loan could also deliver a hit to your credit scores if you fail to repay it. Payday loans that end up in collections may be reported to the credit bureaus. Unpaid collection accounts can knock points off your score. 

In a worst-case scenario, a lender could sue you for an unpaid payday loan. If they win a judgment against you, the lender could take additional steps to garnish your wages or bank account to collect what's owed. 

How to avoid the payday loan trap

The best way to avoid a payday loan is to create a financial buffer, so you won't need to rely on short-term loans at all. That can take time to do, but it can be worth it the next time an emergency rolls around. 

Here are a few tips to help you avoid the payday loan trap.

• Start a budget. A budget is a plan for spending the money you bring in each month. If you don't have a budget, it's time to think about making one. You might use a spreadsheet, a budgeting app or just pen and paper. Write down everything you spend in a month on bills, food and "fun". Then subtract the total from your expected income for the month to see what's left over. 

• Cut expenses. If there's little or nothing left after the bills are paid each month, ask yourself what you can cut down or cut out altogether. This may be hard to do if your budget is already as lean as you can get it. In that case, the next tip may be more useful.

• Find ways to bring in more money. Imagine if you had an extra $100, $500 or $1,000 each month. That could make it easier to get through any financial hiccups as they happen. Starting a side hustle, getting a part-time job, selling things you don't need or taking on more hours at work could help you add more dollars to the income side of your budget. 

• Build a rainy day fund. An emergency fund is meant to help you get through rough patches. If you have some extra money in your budget, either because you've cut back on spending or boosted your income, that could be your seed money for emergency savings. No amount is too small to start with, even if it's just $10 or $20 each payday. 

Another way to avoid payday loan debt is to know what other possibilities you might have to get the money you need. We'll walk you through some alternatives a little later on. 

When a payday loan might be the only option

Sometimes, a payday loan may be the only way to get cash quickly. That can happen if you've applied for other loans but don't qualify because of your credit or you don't know anyone who might be able to lend you money. 

If you can only get a payday loan, research is your friend. Whether you're shopping for payday loans in Nebraska or another state, compare lenders to find the best deal for your needs. Specifically, consider:

• Interest rates

• Finance charges and other fees

• Loan limits

• Loan terms

Stick to borrowing only the amount you need, and plan ahead to make sure you'll have the money in your account on payday to cover the debt. Avoid renewing or rolling over the loan if possible, since that can only make the debt more expensive. 

Safer alternatives to payday loans

Payday loans are meant to meet short-term financial needs, but their terms often favor the lender, not the borrower. If you're looking for safer ways to get cash, consider these options. 

Credit cards

Credit cards can help you pay for necessary expenses or emergencies when you need money in a pinch. Compared to payday loans, credit card APRs can be significantly lower and some cards offer a 0% APR for an introductory period. 

One mistake you don't want to make is taking a cash advance from a credit card. Credit card advances typically have a higher APR and interest starts accruing right away. 

Earned wage access

Earned wage access is a cash advance you get through your employer. If your company works with an earned wage access provider, you might be able to get some or all of your future earnings before payday. 

While some providers charge no interest or fees, others do. Before you take money from your paycheck early, review the details so you know what you might pay and when you're expected to pay the advance back. 

Personal loans (banks or credit unions)

Banks and credit unions offer personal loans to borrowers who need money for everything from emergencies to home repairs to debt consolidation. You may be able to borrow up to $100,000 with a personal loan and interest rates are typically fixed. 

You'll need good to excellent credit to qualify for the lowest personal loan rates, but it's possible to get bad credit personal loans. Comparing loan terms, fees, rates and limits can help you find the right lender to work with. 

Payday alternative loans (PALs)

Payday alternative loans (PALs) are short-term loans offered at credit unions. You can borrow between $200 and $1,000 and pay it back over 1 to 6 months. You'll need to join a credit union to apply, but plenty of credit unions extend membership to everyone. A payday alternative loan can give you more time to repay back what you owe, at a much lower cost than a traditional payday loan. 

Credit-builder loans

Credit builder loans are small loans you get through a bank or credit union for the purpose of building a credit history. Here's how they work:

• You get approved for a loan and the amount is deposited into a secure account.

• You make payments to the loan balance each month, and those payments get reported to the credit bureaus.

• Once the loan is paid off, the money held in the secure account is turned over to you.

A credit-builder loan is probably not the best choice in an emergency. However, if you'd like to establish a good credit history so you can qualify for other types of loans, this is one way to do it. 

State-specific assistance programs

State assistance programs can offer financial help with rent, utilities, food, medical bills and child care. This type of aid isn't a loan, so there's nothing you need to repay. Some states also offer emergency cash assistance for specific needs. For example, in Nebraska you can get cash help if you need to exit an unsafe living situation. 

Other Nebraska aid programs include:

• Medicaid

• Aid to Dependent Children (ADC)

• Women, Infants, and Children (WIC)

• Supplemental Nutrition Assistance Benefits (SNAP)

• Low Income Energy Assistance Program (LIHEAP)

You can reach out to your local Department of Health to learn what kind of help you may qualify for and apply. Note that eligibility is typically based on your household size, income, and assets. 

Borrowing from family and friends

If you have friends or family members you can lean on, you might be able to ask them for a loan. Borrowing from people you know could help you avoid interest charges and credit checks. However, it can get tricky if you don't pay them back.

Working out a payment agreement and plan beforehand might help the person loaning you money feel more reassured about getting it back. If you want to go a step further, you could sign a promissory note outlining what you'll repay and when the loan should be paid off. 

Side hustles

Side hustles can help you make money fast, sometimes as quickly as the same day. Some of the ways you might side hustle for extra cash include:

• Selling things you don't need on Craigslist or Facebook Marketplace

• Delivering food or groceries

• Running errands for people in your neighborhood or community

• Doing odd jobs, like minor home repairs or yardwork

• Using cash-back apps to get money back when you shop for groceries or household items

• Doing freelance work online

Conclusion

Payday loans can help you get through a tough time, but they're more of a last resort than a first choice. There are other ways to get the money you need, without taking on all of the risk that payday loans often carry. For example, MoneyLion Instacash allows you to tap up to $500 of your pay when you need it, with no interest, credit checks or mandatory fees. You can get your money in 1 to 5 business days, or instantly for a fee. Just download the MoneyLion app, link your checking account, and receive direct deposits to qualify. 

FAQs

What is the maximum loan amount I can borrow in Nebraska?

The maximum payday loan amount in Nebraska is $500. You can't have more than one loan per lender at a time. 

What fees and interest rates can payday lenders charge in Nebraska?

Nebraska law caps payday loan interest rates at 36%. Finance charges cannot exceed $1.38 per $100 borrowed. 

How long do payday loans last?

Payday loans typically have terms ranging from 7 to 35 days. In Nebraska, the maximum loan term is 34 days. 

Will a payday loan affect my credit score?

Payday loans won't affect your credit when you apply if the lender doesn't perform a credit check. Repaying a payday loan may not affect your scores either if the lender doesn't report your payments to the credit bureaus. Defaulting on a payday loan could hurt your credit, however, if the lender decides to report your account. 

Can I get a payday loan with bad credit?

It's possible to get a payday loan in Nebraska or other states that allow payday lending with bad credit. That's because these loans are designed for people with less than perfect credit, so a credit check may not be required at all. 

What should I do if I can’t repay my payday loan on time?

If you can't repay a payday loan by the scheduled due date, talk to your lender. You may be able to renew, roll over or extend the loan if your state laws allow it. If that's not an option, you'll need to come up with a plan to make sure you'll have the money in your bank account to cover it on payday. That could mean selling things you don't need, getting a side gig or two or asking someone you know for a temporary loan.

Sources

• Nebraska Department of Banking and Finance

• Federal Trade Commission - What To Know About Payday and Car Title Loans

• My Credit Union - Payday Alternative Loans

• Federal Reserve - An Overview of Credit-Building Products