What is the profit in chit fund?
Table of Contents
What is the profit in chit fund?
Comparison Between RD and Chit Fund
| Particulars | Recurring Deposit | Chit Fund |
|---|---|---|
| Type of Investment | Safe | Risky |
| Type of returns | Fixed returns | Returns depend on bidding, lotteries and distributable surplus |
| Guarantee | Guaranteed profit | Profit or loss |
| Interest rate | Higher rate of interest | Relatively lower rate of interest |
What is the average return on chit fund?
Chit Fund Vs Fixed Deposit
| Chit Fund | Fixed Deposit |
|---|---|
| Pays competitive interest rate than banks. Investors can get returns as high as 12-15\% | Interest paid by banks range between 7.5-9.5\% |
| The interest is paid in the form of dividend every month | The entire principal amount + interest is returned only on maturity |
Is chit fund better than mutual funds?
In the case of mutual funds, the money is invested in stocks/bonds. And chit funds use the money to lend it and the income generated is divided equally among all subscribers….Chit Funds Vs Mutual Funds.
| Chit Fund | Mutual Funds | |
|---|---|---|
| Principal guarantee | Principal is guaranteed | There is a risk of losing the principal amount |
What is the interest rate in chit funds?
At the end of the period i.e. on maturity date, the customer is paid the maturity value i.e. principle deposited and the interest payable. The current rate offered by banks is around 8.5\%. This is subject to government regulation. The same money can be invested in a chits and the investor can earn 12-16\%.
What are chit funds and how do they work?
Chit funds have several participants who pay a fixed amount at regular intervals for the length of the chit fund scheme, as defined by the chit fund company. The money raised at each interval is then auctioned off to all of the chit fund members.
How does a chit auction work?
Chit Auction At this stage, a chit auction is announced by the chit fund company after the contributions of each member is collected. If only one member wants the auction, he/she is allowed to take the chit fund amount. Stage 4. Lucky Member
What should I check before investing in chit?
A chit fund should be registered. Check the certificate of incorporation from the registrar or the companies. Check the certificate and registration number issued by registrar of chit funds of state in which the chit operates. Check details about promoters before investing in chit. The promoters of chit should be financially sound.
What are the stages of chit fund business model?
The following are the five stages of chit fund business model: Stage 1. Set-up The first stage involves the chit fund company launching a particular chit fund scheme, allowing people to become members of the chit. Stage 2.