In situations with high risks, credit might create further problems for the borrower Explain - Social Science - Money and Credit

Question

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

Ankita Bisht · Accepted Answer

In situations with high risks, credit might
create further problems for the borrower This is also known as a
debt-trap Taking credit involves an interest rate on the loan and
if this is not paid back, then the borrower is forced to give up
his collateral or asset used as the guarantee, to the lender Thus,
in situations with high risks, if the risks affect a borrower
badly, then he ends up losing more than he would have without the
loan

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