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What You Should know About Chit funds

Postby skysnap » 15 Sep 2018, 12:20

When you wish to have personal loan or say business loan. And all the genuine bank an the commercial sources are bailing out on you. In such case you can see that chit funs provide one way for you to acquire the loans. Though such programs often don't help much with the proper funding. You just have to understand that there are few thihngs that you don't know about the chit funds. So here in this article I am going to show you few things about the chit funds.

What are chit funds?

Let's imagine you have 10 friends who are close to each other and you respect and trust each other. Each month you come up with say 100$ and total 1000$ are collected. You can find one person randomly selected from the 10 and reward him that money. And then in next month, last months rewarded person is out of the draw. But he still gets to add the money. And then the cycle repeats till all the people are paid 1000$. So this way each one from the group can earn 1000$ and gets to make money.

Is it safe to invest into the chit funds?

If you are doing the chit funds with the known people then yes they can be safe to invest into. And if you invest into the people who don't know about you and you about them. This could be one of the risky investment. I know many people who lost money in the chit funds. And some of the core members in such funds ran away. So such type of the stuff always happens. And you can see that it can be bad investment model also bad loan model.

Should you invest into chit funds to get business loan?

I think there are people who get loan through model such as this. And also it ends up making them pay up cyclical if you check some of the chit fund hybrid models. So being in that type of the model for the funding for business. It can be seriously wrong. And people have to be seriously understanding how the loans can go wrong in such case. I personally prefer to invest into the bank loans instead of such chit funds. Because things work professional and through process there.

What's the alternative instead of chit funds?

If you want to take loan from the trusted sources. Then your family, friends or even the crowdfunding is a way to go. You can see that crowd funding and the public funding options are lot better. There are plenty of such options out there. Kickstarter and patreon being one of them. I'd recommend making use of those options instead of going through chit funds. As they tend to be more insecure and also just puts you into cyclical nature of wastage of money.

Chit funds are only safe if you are with the known group of people. And in such case you have to be really cautious about investing. Most of the chit funds broke after some time. So I suggest making use of the chit funds among the known people. Avoid joining the random chit group funds. Make sure to get the angel funding or the proper business funds instead there.
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