The difference between formal and informal sources of credit or loans is that the formal sources of credit are registered by the government, and the informal sources are not under Government's control.
The formal sources of credit are directly controlled by the government and are expected to follow the rules and regulations made by the government. Both the sources of credit are open to the public or customers. But, it is always safe to go with the government-regulated sources of loans as they are well-supervised and secured.
Formal and Informal Sources of Credit
Loans from banks and cooperatives
Loans from various sources such as money lenders, merchants, traders and employers etc.