Chapter 3

NCERT
Class 10
Economics
Solutions
10. 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.

Question:

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:

Manav also needs a loan to start a small business. Man or man decides from many things whether he should take loan from the bank or from the moneylender, understand through some points-

(i) He has to first understand the difference between the formal interest rate by contacting financial institutions and banks and then by contacting informal sources like moneylenders etc. their interest rate and other credit terms.

(ii) perusal or analysis of the terms of credit ie. Tawezi work, loan basis, furnishing of guarantee etc.

(iii) The mode of repayment or repayment of loan ie size of installment, periodicity (monthly, quarterly, half yearly or yearly) or lump sum payment at the end of fixed period (i.e. two years, three years).

(iv) What is his own capacity to repay the loan?

(v) Once again end-to-end analysis of the entire information collected. Only after this the person will reach the decision that according to his repaying capacity, from which credit source he should borrow or take loan.

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