Going day by day, the value of people’s savings is decreasing. By investing, people can solve this problem. Investment is a process of putting money into buying an asset, such as gold, a flat, or the stock market. Chit funds is one of the best financial plan for investment. In chit funds, every month, a fixed amount is collected by a group of people, and the collected amount is given out by an auction lottery method. The chit funds have low risk, they also offer more profit.
It improves people’s lives financially. The savings are good habits that save lives, but investment is ideal for growing a better life. Especially investing chit funds in a trusted company like Amico Chit Funds is a good choice for people’s investment.
Understanding the Concept of Chit Funds:
In every month, a fixed amount is collected by a group of people, and the collected amount is given out by an auction lottery method. Chit’s funds are a popular investment plan in Tamil Nadu. One of major benefit of chit funds is money rotation because people contributing money in their group can give their money to a person who is elected by auction or lottery. This fund is suitable for medical expenses and business capital.
Dual Advantage: Saving and Borrowing in One fund:
One of the most important advantages of Chit Funds compared to other financial instruments is the dual benefit of saving and borrowing within a single scheme. Each member contributes a fixed amount every month, which creates a pool of funds. Each month, a participant receives the amount collected through an auction process or lottery draw. Its plan is one of the most flexible and practical investment options compared to other financial services.
Why Chit Funds Are a Smart Financial Choice:
Flexibility and Accessibility:
If people want a bank loan for their needs, the banks have more formalities for verification, such as required documents. But chit funds don’t go under such a tough process. Compared to other financial schemes chit fund is easy and simple to join, and it does not require advanced knowledge about finance or a large investment amount. Every category of people, like salaried employees, small business owners, IT Employees, Doctors, and homemakers can participate in a chit fund.
Rotation of Money
A major benefit of chit funds is money rotation because people contributing money in their group can give their money to a person who is elected by auction or lottery. This fund is suitable for medical expenses and business capital
Economic-friendly:
Various people know chit funds popularly in Tamil Nadu, especially the middle-class people. People don’t qualify for the bank’s loan or bank access. Chit funds are good for those people. The people who have loyal members in a group can start a chit fund
Low interest compared to bank:
Usually, banks charge a 12%-18% interest charge, a processing fee, and a penalty charge. This will make the common people a heavy burden. Auction in the system, Chit funds make money early by bidding for a higher discount rate. It will have less interest than personal loans
Social Bonding & Social Security:
Family group members can also invest in chit funds because this fund is only built by loyal members or an organization. This makes the family bond stronger. It also gives good security to the domestic worker or informal worker.
Group-based system used for emergency purposes:
The bank loan approval process will take time, which cannot help in case of an emergency. Here, group-based chit funds are a major advantage. Because this group-based system in chit funds helps people win early in the month, they can have a huge amount. It will help for emergency purposes and immediate needs.
Well-suited to Informal Sector Workers:
Many rural areas don’t have banking facilities. If a bank is in that place, they will ask for documents like collateral, a salary slip. Workers, like farmers, dairy workers, and unofficial work, have been unable to use banking facilities. So this type of problem is solved by chit funds because it does not require much more document verification. So only chit funds are trusted by many village people or informal workers.
Conclusion:
Apart from saving, investment is very important for developing people’s lives. This adds value to people’s savings funds. In investment, a chit fund is simple and popular among common people. Compared to a bank, Amico Chit fund has a low interest rate and fewer documents required. Chit funds mainly benefited middle-class people who need money in the short term. So, only chit fund investments are welcomed by people in rural areas.
FAQ
1. How Does a Chit Fund Work?
A group of 20 people gives 10,000/-month a total of 2,00,000/-. This contribution amount will be given to one of the people in the chit’s funds group by auction or lottery methods.
2. Are Chit Funds Legal?
Yes, chit funds are legal, but people request to invest in a registered organization.
3. Why Should We Invest in Chit Funds?
Chit funds help people save money daily. Chit funds give collections of amounts to people when they need
4. How Is the Monthly Winner Selected?
The Monthly Winner of Chit Funds is selected by auction or lottery methods.