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CBSE Class 10 Answered

situations with high risks credit might create further problems for the borrower. explain.
Asked by psukhman672 | 06 Jan, 2022, 07:00: PM
answered-by-expert Expert Answer

The situations with high risks credit might create further problems for the borrower due to the following reasons:

  1. The borrowers have to pay interest on principal as well on interest to lenders.
  2. If the borrowers’ default in payment, then the lender may sell the assets of the borrowers to recover the money. This may further create problems for the borrowers.
  3. In case of farming, the uncertainty of rainfall and bad harvest pushes the farmer into debt trap as he/she is unable to repay the loan and is in risk of losing his/her land. In this case, instead of helping farmers prosper, the credit could make the situation worse.
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