Question

Rita availed a loan from the local moneylender at a high rate of interest. Which of the following is an impact of the high interest loan?

• A. Easy repayment of the loan
• B. No repayment of the loan
• C. Repayment of a higher amount
• D. Repayment of a lesser amount

Answer 1

The correct option is C Repayment of a higher amount

A high interest rate can mean that the amount to be repaid is greater than the income of the borrower. This could lead to increasing debt levels or a debt trap. Informal lenders also keep no records of the transactions and sometimes even harass the poor borrowers.