Question

What are the 3 main drawbacks of informal source of credit?

Answer 1

Drawbacks of informal sources of credit and Chit fund ExplainedMost of the informal lenders charge a much higher interest on loans.Thus the cost to the borrower of the informal loans is much higher.Higher cost of borrowing means a larger part of earning of the borrowers is used to repay the loan and they have less income left for themselves.

Answer 2

Answer:

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Explanation:

Drawbacks of informal sources of credit and Chit fund Explained

1.Most of the informal lenders charge a much higher interest on loans.

2.Thus the cost to the borrower of the informal loans is much higher.

3.Higher cost of borrowing means a larger part of earning of the borrowers is used to repay the loan and they have less income left for themselves.