answer the following questions
1. Why do people require credit.
2. Define collateral.
3. Write the differences between formal and informal credit.
Answers
Answer:
1)Credit is part of your financial power. It helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later. Working to improve your credit helps ensure you'll qualify for loans when you need them.
2)Collateral may take the form of real estate or other kinds of assets, depending on the purpose of the loan. The collateral acts as a form of protection for the lender. That is, if the borrower defaults on their loan payments, the lender can seize the collateral and sell it to recoup some or all of its losses.
3)Formal sources follow the sources of credit that are registered by the govt. and have to follow its rules and regulations whereas in informal sources include those small and scattered units which are largely outside the control of the government.
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