BENEFITS
Chit funds have been playing a stellar role even before the advent of modern banking era, in coming to rescue of the needy at affordable terms.
This system has numerous built-in advantages due to which people prefer this option over other formal institutions. These are:
Chit Funds have the advantage both for serving a need and as an investment. Money can be readily drawn in an emergency or could be continued as an investment.
Interest rate is determined by the subscribers themselves, based on mutual decisions and varies from auction to auction.
The money that you borrow is against your own future contributions. Cost of intermediation is the lowest
The amount is given on personal sureties too; unlike in banks and other financial institutions which demand a tangible security.
Chit funds can be relied upon to satisfy personal needs. Unlike other financial institutions, you can draw upon your chit fund for any purpose – marriages, religious functions, medical expenses, children’s education, etc.
Chit fund is a saving cum borrowing instrument, which is unique when compared to other financial systems. When you invest in chits you get more return as compared to other Financial Intermediaries and when you borrow you pay less interest