credit is useful as well as harmful it depends on the risk involved support the statement with example
Answers
Answered by
73
Credit is useful because
(i) It helps to meet the working capital needs of production.
(ii) It helps in setting up new industries or businesses.
For ex: small scale industries lend loan to expand their profits.
But, it is harmful also that depends on the risk involved
(i) Credit pushes the borrower into a debt-trap in the case of high risk.
(ii) Instead of improvement in earnings, the borrower is much worse off than before.
For example, farmers have to sell part of land to repay the loan.
:) Hope this Helps!!!
ALL THE BEST FOR UR EXAMS !!!
DO IT WELL !!!
(i) It helps to meet the working capital needs of production.
(ii) It helps in setting up new industries or businesses.
For ex: small scale industries lend loan to expand their profits.
But, it is harmful also that depends on the risk involved
(i) Credit pushes the borrower into a debt-trap in the case of high risk.
(ii) Instead of improvement in earnings, the borrower is much worse off than before.
For example, farmers have to sell part of land to repay the loan.
:) Hope this Helps!!!
ALL THE BEST FOR UR EXAMS !!!
DO IT WELL !!!
nitthesh7:
if u find it most helpful mark it as brainliest
Answered by
2
Answer:
In situations with high risks, credit might create further problems for the borrower. This
is also known as a debt-trap. Taking credit involves an interest rate on the loan and if this
is not paid back, then the borrower is forced to give up his collateral or asset used as the
guarantee, to the lender. If a farmer takes a loan for crop production and the crop fails,
loan payment becomes impossible. To repay the loan the farmer may sell a part of his
land making the situation worse than before. Thus, in situations with high risks, if the
risks affect a borrower badly, then he ends up losing more than he would have without
the loan.
Explanation:
Similar questions