Manav needs a loan to set up a small business. On what basis will he decide whether to borrow from a bank or a local moneylender?

Availability of collateral

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Interest rate

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Purpose of loan

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Duration of loan

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Solution

The correct option is D Duration of loan
The terms of loan help to decide whether one would borrow from a formal source or from an informal source. If the borrower is able to arrange a collateral, then he can get credit from a formal source. Otherwise, he has to take loan from an informal source.

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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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