'Credit pushes the borrower into a situation from which recovery is very painful'.Justify

Well this statement is true. When a poor person takes a loan he does find it convenient to go to a bank basically because he is uneducated and even does not have a collateral to present in a bank. Hence he reaches out to the informal sources of credit which are basically the moneylenders. When he goes to moneylenders the rates of interest charged by them is very high but since the borrower is in need he has no other option. In most of the cases it happens that the income of the borrower is much less than the amount of loan which he has taken and plus the high interest which he has to pay. Thus this cycle of repaying his loan never ends and the borrower sees himself caught in a debt trap. Finally credit instead of enhancing the situation of the borrower makes it even worse.


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