Question

What is a credit? How it be positive or negative with it's role? Explain with example.
I need quick answer plz

Answer 1

Answer:

Credit is basically the loan given to lender by the borrower.

It can be positive as:

It can improve the lifestyle of an individual.

It can be negative as

It can push the person in a debt trap

Answer 2

Answer:

Credit (from Latin credit, "(he/she/it) believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), but promises either to repay or return those resources (or other materials of equal value) at a later date. Example-

• First money can play a positive impact on people. Let us suppose it is the festive season and a shoe manufacturer named Salim got  a order to manufacture 3000 shoes by the end of the month. To complete production in time Salim hires 20 workers for stitching and pasting. He obtains credit from 2 places, first he takes the advance for 1000 shoes from the merchant and promises to supply the whole order later and he asks the leather supplier to supply him the leather with the promise of paying him later. Salim completes production and earns a profit. Here money enhances the economic situation of the person.
• Second money can play a negative role as well. Let us suppose there is a small farmer named Gita who grows groundnut on her 3 hectares of largely unirrigated land. She takes a loan from the local moneylender to repair her equipments and irrigate her land. But midway during the growing the crops are hit by a pest epidemic though Gita sprayed them with high quality fertilizers. She is unable to repay her loan and it grows to be a huge sum over the year. She takes another loan and this time it is a normal crop but she was unable to repay the first loan. She is trapped in a debt trap and had to sell some part of her land to repay it. Here, credit instead of enhancing the position of the person leaves them worse off.

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