Manav will decide whether to borrow from the bank or the moneylender by considering some factors like:
- Ease of availing loan: Manav will assess whether he meets the bank’s eligibility requirements, such as credit history, business experience, and annual revenue. Moneylenders may have more lenient eligibility criteria but may lack transparency.
- Interest rate applicable : Formal banks typically offer lower interest rates compared to moneylenders. Moneylenders may charge higher interest rates due to their informal nature.
- Collateral demanded : Banks usually require collateral (such as property or assets) to secure the loan. Moneylenders may accept personal guarantees or other forms of security.
- Repayment facilities : Manav will consider collateral requirements, and repayment terms set by the bank. Banks have standardized procedures. Moneylenders may have simpler processes but could impose stricter terms.
- Documentation : He will also consider paper work involved in the process of availing loan. Bank has to strictly follow the KYC norms.
- Existing high loan : Existing loans can stop him to avail fresh loan from banks.