Access to fair and affordable credit is essential for entrepreneurs, families, and communities to thrive. Unfortunately, not all lenders operate with integrity. Predatory lending refers to deceptive, unfair, or abusive loan practices that trap borrowers in cycles of debt instead of helping them build stability.

That’s why understanding the warning signs of predatory lending is critical.

What Is Predatory Lending?

Predatory lending happens when lenders use misleading information, aggressive sales tactics, or unfair terms to take advantage of borrowers. These practices often target individuals and small businesses who have limited access to traditional banking services.

Instead of providing a pathway to growth, predatory loans drain wealth, strip away assets, and create long-term financial harm.

Common Features of Predatory Loans

Borrowers should be alert for these red flags:

• Excessively high interest rates and fees that far exceed market norms.

• Loan terms that are confusing or hidden, such as balloon payments or prepayment penalties.

• Pressure to borrow more than you need or to refinance repeatedly.

• Collateral-based lending, where approval depends on assets rather than ability to repay.

• Targeting of vulnerable communities, including immigrants, low-income families, and small businesses without access to mainstream credit.

The Impact on Communities

Predatory lending doesn’t just hurt individuals — it weakens entire communities. When borrowers are stuck in cycles of debt, they cannot reinvest in their families, businesses, or neighborhoods. This creates barriers to economic mobility and deepens inequities in wealth building.

How MEDA Supports Fair Lending

MEDA is committed to ensuring that entrepreneurs and families have equitable access to responsible financial products. Through our lending programs and partnerships, we provide:

• Fair, transparent loan terms designed to support long-term success.

• Business and financial coaching to empower borrowers with knowledge and confidence.

• Connections to trusted financial resources that put people and communities first.

By offering alternatives to predatory products, MEDA helps entrepreneurs grow businesses that create jobs, support families, and strengthen communities.

What You Can Do

• Educate yourself and others about predatory lending practices.

• Read loan terms carefully and ask questions before signing.

• Seek out nonprofit lenders and community-based financial organizations that are mission-driven.

• Report suspicious practices to consumer protection agencies.

Our Commitment

MEDA stands with entrepreneurs and communities in the fight against predatory lending. We can work with you to replace exploitative financial practices with pathways to opportunity and shared prosperity.