in situations with high risks, credit might create further problems for the borrower. explain
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Answer:
In situations with high risks, credit might create further problems for the borrower. ... He has to repay the credit along with the interest applied by the lender. This increases the problems for the borrower. In such a situation, he is forced to give up his collateral or asset used as the guarantee, to the lender
Every buisness,be it agriculuture,industry or service sector,involves risks.Every loan involves the liability of repayment of the amount plus interest .
Loan is taken in anticipation that the income from the use of loan will be more than the amount that is to be repaid.
If it works out favourably like this.Everbody stands to gain,both the lender and the borrower.
But if the enterprise fails, the borrower is in trouble.He will not have any means to repay the loan.He may find himself caught in the debt trap.
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