Question

4. Mahesh is small farmer. He has taken a loan Rs. 2 lakhs from the money to meet the expenses or
cultivation. The annual interest rate on the loan is very high, so he is unable to repay the loan and he is a
caught is debt. He is has to sell a part of the land to pay of the debt.
Analyse the loan information ghven above, considering one of the following correct option:
(a) Terms of credit
(b) Interest on loan
(c) Debt-trap
(d) Mode of repayment
medium of exchange without any use of its own?​

Answer 1

Answer:

terms of credit is the correct answer

Answer 2

(d) Mode or Repayment

Explanation:

• Credit taken always does not play a positive role. At time in situation such as high risks the credit may create further problems and issues for the borrower
• For example, lets say A a small farmer grows paddy on his 4 acres of land. He takes a loan of 3.5 lakhs from the money lender to meet the expenses of cultivation with the hope that harvest would help him repay back the loan. However, mid-way  through  the  cropping season, the paddy is  hit  by  pests  and  unfortunately the crop  fails. This makes A unable to repay the money lender and the debt keeps growing year on year into large amount. Presume A next year takes additional loan for paddy cultivation. Although it is a normal crop this year, however the earnings are not sufficient to cover A's old loan. Hence, A is caught in debt and he is forced to sell a part of his land to pay off the debt. Hence, credit taken always does not play a positive role. At time in situation such as high risks the credit may create further problems and issues for the borrower