4 Explain the term debt-trap. Why is it more
rampant in rural areas? Give two reasons.
Answers
Answer:
Debt-trap is a situation in which a person after taking a loan is not able to pay back the loan. ... It is more common in rural areas because. (i) A borrower repays a loan by selling the agricultural produce, which sometimes may not be enough to repay the loan.
MEANING---
A situation in which a debt is difficult or impossible to repay, typically because high interest payments prevent repayment of the principal. 'a new personal bankruptcy law aims to help individuals free themselves from the debt trap'
EXAMPLES---
(i) A borrower repays a loan by selling the agricultural produce, which sometimes may not be enough to repay the loan. (ii) Rural borrowers normally depend on informal sources of credit who charge a high rate of interest. This repayment of larger amounts may sometimes be larger than their income.