OMAHA, Ne (FOX42KPTM) — A Fremont man has a warning for anyone desperate for money: Stay away from payday loans.
The interest rates for those kinds of loans are in the hundreds, but there is a new bill in Nebraska that could bring that way down.
Though he stopped using payday loans a year ago, he says it took him awhile to get out of debt.
Now, he's doing everything he can financially to never get one again.
"A payday loan should be something that helps you get out of a situation," Bruce Vesper said.
That’s what he thought when he first got a payday loan for $425. Instead, that plan backfired.
"It's only a short term loan, so your interest isn't going to be that high, but when I went back in there to pay it, I'm paying almost $600 back to them," Vesper said.
He says he didn't have the $600 to pay back, so he got another loan until his next payday.
He says that put him in the red a second time.
"It was kind of like a Catch-22,” Vesper said. “Once you get into it, it doesn't help you get out, it just keeps you in that same cycle."
Sen. Tony Vargas has a plan to keep others out of the vicious cycle.
"It's not only a city problem, a state problem, it's a nationwide problem," Vesper said.
Vargas' bill would cap the interest rates on payday loans at 36 percent – a big drop from the annual rate of up to 460 percent.
For example, if you got a $500 loan at the current rate, you could be paying back a total of $2,3000 in interest alone annually.
If the bill passes, the interest would drop to $180 a year.
But until Nebraskans wait to see what happens with the bill, University of Nebraska Omaha professor Olivier Maisondieu Laforge advises people to avoid payday loans altogether.
"Any other way you can get money – if you have to put it on a credit card, put it on a credit card,” Laforge said. “It will be cheaper."
Vesper took a class to help him stay on track with his money.
He's even encouraging others to not get a payday loan if they can help it.
Vargas’ bill would also set the maximum monthly payments at 5 percent of the person's monthly income.
A similar bill was introduced last year but never made it out of committee.