The differences between formal sources and informal sources of credit are
|Points on Which Different||Formal Sources of Credit||Informal Sources of Credit|
|Borrower's capability||Richer people having assets which can be pledged as collateral.||Poorer people not having assets which can be pledged.|
|Rate of interest Sources||Reasonably low Banks and cooperative societies.||Very high Traders, moneylenders, land-owners, etc.|
|Action on default of payment||Collateral can be confiscated and sold to recover the loan.||Borrowers can be made as bonded labourers or made to part with land owned by them.|
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