NCERT Solutions for Class 10 Social Science History Chapter 3
Social Science Class 10 Economics
Money and Credit 3
Important NCERT Questions Based on new NCERT Books for Session 2022-2023
Questions No: 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.
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Manav will decide whether to borrow from the bank or the money lender on the basis of the following terms of credit:
• Reasonable rate of interest
• Collateral security demanded and documentation required by the banker.
• Mode and schedule of repayment of principal and loan. The penalty and repercussions applicable in case of default in repayment.
Terms of repayment are different of bank and the money lender. Whichever he finds easier he can consider that. Depending on these factors and of course, easier terms of repayment, Manav has to decide whether he has to borrow from the bank or the moneylender.
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Factors Influencing Manav’s Decision to Borrow from a Bank or Moneylender:
1. Interest Rates: Manav will check which option offers a lower interest rate for the loan. Banks generally have lower rates compared to moneylenders.
2. Terms and Conditions: Banks might provide more flexible repayment schedules and longer loan durations compared to moneylenders, which might have stricter terms and shorter repayment periods.
3. Collateral Requirement: Banks often ask for collateral (like property) for larger loans, while moneylenders might not. Manav will consider if he has assets to offer as collateral.
4. Credibility and Trust: Banks are regulated and more reliable institutions, offering transparent processes. Moneylenders might be less regulated, making their reliability questionable. Manav may prefer a more trustworthy option.
5. Credit History: Banks consider credit history, which might affect Manav’s chances of getting a loan. Moneylenders might be less concerned about this, making it easier for those with poor credit to borrow.
6. Speed of Loan Approval: Moneylenders might approve loans quicker than banks, offering faster access to funds. If Manav needs immediate money, he might choose a moneylender for quicker approval.
7. Customer Service: Banks usually offer more customer support and financial advice compared to moneylenders. Manav might consider this when making his decision.
Manav will consider these factors carefully to choose the option that suits his needs, whether it’s the lower interest rates from banks, more flexible terms, collateral availability, credibility, credit history flexibility, quick approval, or better customer service.