Chit funds are often considered the best one-time investment plan with good returns, as they provide opportunities for both savings and borrowing. This investment option has been a significant part of traditional Indian investment options and has been imbibed deep within the financial culture for decades. Here are some myths and facts about chit funds in India.
5 Myths and Misconceptions Around Chit Funds
If you are concerned about the credibility of chit funds, choose a recognised platform that ensures safe and good return investments in India. It’s necessary to learn the facts and know what’s right for your financial health. Let’s bust some popular myths and misconceptions around chit funds and learn the facts.
Myth 1: Chit Funds are Unsafe and Unregulated
Chit funds are considered safe if managed by registered and recognised companies, operating under and compliant with the framework of the Chit Funds Act, 1982. The Chit Funds Act of 1982 offers a regulatory framework and safety protocol for organising and managing chit funds in India.
Furthermore, every recognised chit fund operator will be registered with the Registrar of Chits. Thus, it ensures higher transparency and that all the auction winnings are distributed unbiasedly. So, if you choose the right company, chit funds can be a reliable financial tool for individuals looking for safe and good return investments in India, as they provide the dual benefits of savings and borrowing.
Myth 2: Chit Funds are Only for Short-term Financial Goals
Chit fund is a great financial instrument for fulfilling both your short- and long-term goals, thanks to its amazing flexibility. You can personalise a chit fund scheme according to your preferred tenure, investment goals, and financial stature. You can choose short-term chit plans if you need money shortly. Chit fund schemes let you withdraw funds quickly.
On the other hand, if you have long-term goals, such as planning for retirement or a major life event a few years later, you can choose to access the pot money after investing steadily for a longer duration. Chit funds are beneficial for meeting both short-time cash migraines and big goals some time down the line, such as buying a property, funding your kid’s education, or starting your dream business.
Myth 3: Chit Funds are Only Suitable for People in Rural Areas
The origin of chit funds has been in the rural areas, where people found it a great way to save and borrow money with the joint effort of other investors forming a chit association. Back then, the concept of chit funds was pretty straightforward: people used to form a group and pool their money collectively. Then, they take turns to withdraw funds from that collective pot, especially during emergencies.
This was an excellent saving and borrowing tool, where they helped each other to meet unexpected expenses (like medical needs) or important life events (such as marriage or starting a business). With time, the informal system of pooling and borrowing money became more organised and is now converted into a registered financial tool.
Myth 4: Chit Funds Lack Transparency
Investors fear that chit funds lack the required transparency. They often fear that they might not be able to track their monthly contributions, wins, payouts, or auction results. However, if you choose a good chit plan from a reputable and registered platform (like Margadarsi Chit Fund), you can receive real-time updates and clear guidance on how the process works. The team will guide you regarding auctions, monthly contributions, and winnings.
Myth 5: Chit Funds Work Similarly to Ponzi Schemes
Chit funds are often mistaken for Ponzi schemes. Many people have the misconception that the two are synonymous or work similarly. However, in a Ponzi scheme, members rely on new investors to pay the older ones, and the cycle continues. It is simply a fund rotation system that is done in an illegal or unauthorised manner.
On the other hand, in a chit fund, participants pool a specific amount of capital every month. In each bidding session, one member receives a lump sum amount. The cycle continues till everybody gets their share. A chit fund is transparent, as it enables investors to use it as both a savings and a borrowing tool. It defines contributions, dividends, and payouts clearly.
How is Margadarsi Chit Fund Safe?
Margadarsi Chit Fund provides the best one-time investment plan with good returns while ensuring safety and security with all your fund transactions, from contributions to payouts. We are a reputable brand in the chit fund market in India, as we are known for maintaining honesty and transparency. Besides, our policy of fair distribution of the funds makes our chit plan a safer investment option.
In conclusion, we hope the above myths and facts helped you make concrete financial decisions. Margadarsi Chit Fund is a safe choice for investors, as it helps them gain instant access to the pot money in times of need.
