Question

Joel needs a loan of 1,00,000 rupees, which he can repay within a year. Suggest a suitable source of credit.

• A. A loan from the local moneylender at 15% per annum.
• B. A loan from the bank at 15% per annum.
• C. A loan from the local moneylender at 13% per annum.
• D. A loan from the bank at 25% per annum.

Answer 1

The correct option is B A loan from the bank at 15% per annum.

It is better to opt for a formal source of credit whenever a person wants to avail a loan. Moneylenders may use violent methods to recover the amount loaned. On the contrary, banks evaluate the capacity of the borrower and lend only the amount that they are capable of repaying. Hence, for Joel, it is better to avail the loan from the bank at 15% per annum. In this case, the interest rate is nominal as well as safe.