Question

Which of the following could lead to a debt trap?

a) The high interest rate for borrowing can mean that the amount to be repaid is greater than the income of the borrower.

b) Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan.


c) The high interest rate for borrowing can mean that the amount to be repaid is lesser than the income of the borrower.

d) both (a) and (b.)​

Answer 1

Answer:

Loan-Asset Ratio. For example, if your loan balance is ₹25 Lakh and your ₹10 Lakh, your loan-asset ratio is 2.5. Experts recommend this ratio to be under 0.5. If you are not taking any steps to increase your income, reduce your loan amount or grow your assets, you can easily fall into a debt trap.