Chit fund is a type of rotating Savings and Credit association system. It may be organised by Financial Institutions or relatives. Chit is a written note on a small piece of paper. The people who operate chitties write the name of each member on a separate piece of paper and fold them in a way that the name written on the paper is not visible to the people. It is a scheme in which a person enter into an agreement with specified number of persons that every one of the members shall subscribe a certain sum of money by way of periodically instalment over a period and each subscriber shall in his turn, determined by lot or by auction as maybe specified in the chit agreement by entitled to the prize amount.
It is a contract between foreman and subscribers. Each subscriber agrees to remit a fixed amount of money in a period of time. You can join the scheme easily. The total periodic subscription will be given as prize money to the person who bids by allowing maximum reduction in the price money. Depending on the type of Chitti you will get a maximum reduction of 30 to 40 percent. Each member will get the prize money during the tenure of Chitti. Cities are mainly different types ,they are long term chitty, short term Chitti, multi division chitty etc.
Long term chit funds
Long term Chitty are investment chitties. It starts from 60 months to 120 months. It is more beneficial to customers. They will get a high profit as a dividend. Preplan of the long term cities help the members to satisfy their needs instead of loans. You can make a large amount of money for the future by paying small installments.
Short term chitties
Short term chitties are ranging from 30 months to 60 months. It provides the prize money immediately. In this chitty there will not be more customers bidding the Chitty for maximum discount. So you can bid chitty early and auction the Chitty for an optimum amount to meet their situations.
Multi Division chit funds
Multidivision chitties have one lot and three auctions in a month. It is a unique scheme. Non-priced subscribers will get a chance every month to get a full amount of rice money after reducing commission of the foreman and remaining non prized subscribers will have an opportunity to participate in three auctions also. The total discount received from all divisions distributed equally to all subscribers. There is a chance to get the full prize amount through a draw. They will get more turns to participate in the auction. You can choose appropriate chit from this fund.
How to work chit funds
Most of the people participate in chit funds. But they will not get a profit from it. But we will get it in emergency situations. Chitty is a loan. We will get this loan earliest. It is not an investment. We can see whether the chit fund is good or not.if we join a Rs 10000 chit fund scheme for 5 years ( 60 months).You should get Rs 6 lakhs returns. But you should give a commission of 5%(30,000) to the foreman.So you will get Rs 5,70,00.it is not a profit scheme.
You can call it earlier with less amount. It reduces equally from all the members next kuri.It is a benefit to other members. They reduce the commission from the amount. It has 4% profit only. You can believe KSFE chit. But other chit funds can’t believe it. If you want to join a chit fund, you should select government chit funds.
If you want to make an investment in your life, you can select other options. You can join RD in bank, post office RD,mutual funds.
Benefits of mutual funds
If you want to join a mutual fund with Rs 10,000 for 5 years,you will get 10% returns. You will get Rs 7,80,000 profit.
Amount year % profit
10,000 5 10 7,80,000
8000 5 10 6,24,000
- You can stop it between the period of time.
- It is highly regulated.
- Do not need depend kuri
- It is RBI involved
- It does not have any type of risks.
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