In situations with high risks, credit mi | Class 10 Social Science - Understanding Economic Development Chapter Money and Credit, Money and Credit NCERT Solutions

Question:

In situations with high risks, credit might create further problems for the borrower. Explain?

Answer:

In situations with high risks, credit might create further problems for the borrower. This is also known as a debt – trap. Tracking credit involves a certain amount of loan that is taken by a borrower from a lender at a high-interest rate . it the borrower fails to pay back the loan amount due to some loss in his job or business, he further falls in the trap of credit. He has to repay the credit along with the interest applied by the lender. This increases the problems for the borrower. In such situation he is focused to give up his collateral or asset used as the guarantee to the lender. For example, if a farmer takes a loan for crop production and crop fails , then it becomes nearly impossible for him to repay the loan amount along with the charged interest. To repay the loan the farmer may sell a part of his land making the situation worse than before. Due being unable to repay the loan and harassed by the lenders, many times farmer commit suicide. Thus, in situations with high risk, if the risks , if the risks affect a borrower badly, then he ends up losing more than what he would have without taking the loan.


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NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

  • Read the question carefully and focus on the core concept being asked.
  • Reference examples and data from the chapter when answering questions about Money and Credit.
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Welcome to the NCERT Solutions for Class 10 Social Science - Understanding Economic Development - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 1: In situations with high risks, credit might create further problems for the borrower. Explain?....