Question

whwhat are the difference between formal and informal source of credit ​

Answer 1

Answer:

formal sources usually charges lower rates of intrest. whereas in informal sources they charge much higher rates of intrest. The main motive of formal sources. social wellfare whereas the main motive of Informal sources is profit making

Answer 2

Answer:

formal credit -

1. It is secures people from debt trap.

2.formal credit asks interest at low rates.

3. formal credit requires collateral as a gurantee.

4. formal credits detail are all checked by a supervisor , in Idia this super visor is none the less RBI.

5.They provide loan from legal areas  ..that is not black money

Informal credit-

1.the increasing rates and terms of credit may lead the the borrowers into debt trap.

2.these credit increases with high rates of interest.

3.they sometimes provide credit without collateral

4.there is no supervisior in informal sector so the details of of informal credit can be removed or used of illegal purpose.

5.they provide loan from illegal sections , thus uses black money.