The cost to the borrower of Informal loans is much higher than Formal loans. Comment. Hots Question (100-120 words) pls answer and i promise i will mark your answer as the brainliest.
Answers
Answer:
Explanation:
It is because the person in the informal sector give more money , without any collateral and most important the person who takes the loan from the informal sector knows the other well so he will probably take the loan from the informal sector but at the same time in the informal sector the person asks for a huge interest which is not able be paid by the one who took the loan and eventually he falls into debt trap
In the same time in formal sector they uses a collateral to give loans and also they cannot charge any amount as interest as the RBI supervises the bank and have a clean record of the loan and interest rates given and taken by the bank .
So the cost to the borrower of informal loans is much higher than formal loans