Too Good to Be True? How to Spot a Predatory Loan Before It Spots You

You’ve found the perfect investment property. The numbers work. The potential’s there. All that’s left is the financing. That’s when the loan offer shows up. Fast approval, minimal paperwork, and funds in your account by Friday. Sounds ideal, right? Not always.

Unfortunately, in the world of real estate lending, not every deal is made with your best interest in mind. Some lenders design offers to look appealing, but beneath the surface, the terms can be anything but fair.

What Is Predatory Lending? 

Predatory lending is a problem that affects both first-time investors and the pros. It’s the practice of issuing loans with deceptive, unfair, or abusive terms under the guise of a borrower’s best interest. We’re talking sky-high interest rates, hidden fees, inflated costs, short-term loan structures with high likelihood of extension padded with substantial extension fees and repayment structures that are nearly impossible to keep up with.

Here are a few red flags to watch for:

• Excessive fees buried in the fine print
• Loan flipping, where you’re encouraged to refinance repeatedly, racking up fees each time
• Balloon payments you weren’t prepared for
• High prepayment penalties that trap you in unfavorable terms
• Aggressive sales tactics and pressure to “sign now”

If the lender isn’t asking the right questions about your goals, exit strategy, or how this fits into your broader financial plan they might not be offering the loan for your benefit. They’re offering it for theirs.

Lending Should Be Transparent

Real estate is complex enough without worrying about who’s in your corner. That’s why transparency in lending isn’t a luxury; it’s a necessity. You should never walk away from a conversation with a lender feeling unsure, overwhelmed, or like you’re missing key information.

Lending should feel like a conversation, not a pitch. It’s about understanding the numbers, the risk, the timeline, and how it all plays out in the real world, not just on paper.

What Responsible Lending Actually Looks Like

At Coastal Equity Group, we believe lending should be rooted in relationships. We don’t offer loans just because someone qualifies, we offer them because they make sense for the borrower. That means understanding your investment plan, walking through the pros and cons, and making sure the loan supports your long-term success, not just short-term speed.

If a deal doesn’t align with your goals, we’ll tell you. And we’ve had plenty of conversations that end with, “This might not be the right move, at least not right now.”

Because real estate investing isn’t just about closing deals, it’s about building wealth the right way.

Tips to Protect Yourself from Predatory Lenders

Here’s how you can stay one step ahead:

• Read every line of the loan documents
• Ask direct questions about fees, penalties, and exit strategies
• Run the numbers yourself or with someone you trust
• Don’t rush just because someone’s applying pressure
• Look for lenders who provide clear answers and not just what you want to hear

Predatory lending thrives on confusion, urgency, and lack of transparency. But with the right mindset and the right questions, you can protect your investments and your peace of mind.

Whenever you’re considering financing, take a moment to reflect on whether the terms serve you. If they don’t, there’s no harm in walking away. The right loan should help you move forward not leave you stuck.

And when you’re ready for a conversation that’s honest, clear, and rooted in your goals we’re here to talk.

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