Definition
These types of loans are given out by the friends, relatives, employers, etc. of the borrower.
Cons
These types of loans are not regulated by the government, thus the lender gives loan at absurd interest rates and use ill-methods to get the money back.
Why is it popular?
Since bank doesn’t give out loans to everyone, and are not available at many rural places, the borrowers are forced to get loans from the informal sources.
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Flashcards
Why is informal source of credit popular? ? Since bank doesn’t give out loans to everyone, and are not available at many rural places, the borrowers are forced to get loans from the informal sources.
What is wrong with the informal source of credit? ? These types of loans are not regulated by the government, thus the lender gives loan at absurd interest rates and use ill-methods to get the money back.