question_answer

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

Answer:

If Manav has all the necessary documents showing his paying capacity and collateral security then he will go for formal sources of credit, i.e., bank. Bank will be the best option as he can get loan at a reasonable rate of interest. If he cannot provide necessary documents required for loan from the bank then he has to depend on the informal sources of credit like money lender who sometimes lends at higher rate of interest and uses unfair means to get their money back.