Question

It is said that informal source of credit becomes a debt trap. In the light of this state write the drawbacks of informal sources of credit.​

Answer 1

Answer:

Most of the informal lenders charge a much higher interest on loans. Thus the cost to the borrower of the informal loans is much higher. ... (iii) The high rate of interest of borrowing can mean that the amount to be repaid is greater than the income of the borrower and it can lead to increasing debt and debt-trap.