This Chit fund returns calculator has been developed to calculate the chit-fund estimated return of the whole investment. chit fund is a money-saving scheme popular in India it is also famous in foreign countries, Which works on the same process. Where a group of participating people contribute a fixed amount periodically every month, or regularly as per need. that proves a manually fixed amount of return on their investment, this chit-fund returns calculator helps to calculate all estimated returns received by a member.
Chit Fund Return Breakdown
What is the Chit Fund?
Chit-funds are money-saving and borrowing schemes that allow a chit-fund group member to borrow from this chit-fund on some interest when they need some money. A member of the group manages this chit-fund scheme. Chit Fund is a group of 20-40 members where each member contributes a fixed amount periodically and one member of the group receives the total amount collected (the “chit”) each time, typically through a bidding process.
How does it work?
Formation of the Group:
- A group of individuals, known as “subscribers,” join together to form a chit fund.
- The group size can vary, but it usually consists of 20 to 40 members.
Monthly Contribution:
- Each member contributes a fixed amount of money to the fund every month.
- The total amount collected in a month is called the “chit amount.”
Auction/Bidding Process:
- Every month, an auction or bidding is held to determine which member can take the collected funds.
- Members bid for the chit amount, and the person willing to take the least amount (after a discount) wins the bid.
- The discount is distributed among the rest of the members as a dividend.
Receiving the Fund:
- The winning bidder receives that month’s chit amount (minus the discount).
- The rest of the members continue contributing until everyone has received the chit amount at least once.
Interest/Dividend:
- The discount, or the difference between the full chit amount and the bid amount, is distributed among the remaining members as interest or dividend.
Repetition:
- This process continues every month until all members have received the chit fund once.
Types of Chit Funds:
Registered Chit Funds:
- These are regulated by the Chit Funds Act, of 1982, in India and are considered more secure.
Unregistered Chit Funds:
- These operate informally and are not regulated, which can make them riskier.
Advantages:
- Access to Funds: Members can access a lump sum amount during an emergency or when needed.
- Savings Mechanism: It encourages disciplined saving among members.
- Potential Returns: Members can earn dividends based on the bidding process.
Risks:
- Default Risk: If members default on their contributions, it can affect the entire fund.
- Fraud Risk: There is a higher risk of fraud or mismanagement in unregistered chit funds.
- Regulatory Risk: Not all chit funds are regulated, making some riskier.
Use Cases:
- Chit funds are often used for personal needs like weddings, education, or business investments.
- They are also popular in communities with limited access to formal banking and credit.
How to Calculate Chit Fund Returns
This chit-fund calculator tool will help to visualize the expected value of your potential return in this chit-fund and its benefits. So let’s know how to calculate step by step below.
- First of all, gather all data of your contribution to the chit fund and bidding.
- Fill this, in Monthly Contribution (₹): Number of Months: Bid Amount/Discount (₹): Interest Rate/Dividend (%): and select Chit Fund of Types and then click on the calculate button.
- Now you have on your front all the return lists, that will you receive.
Try Also: Mutual Fund Calculator with Inflation rate
Key Inputs and Formulas Used in the Calculator
Monthly Contribution (contribution):
- This is the fixed amount each member contributes every month.
Total Months (months):
- The total duration of the chit fund in months.
Bid Amount (bidAmount):
- The amount at which the chit fund is bid. The difference between the total contribution and the bid amount is what the winning member takes home, minus any fees.
Interest Rate (interestRate):
- The interest rate applies to the bid amount. This simulates the return you would get if the chit fund were treated as an investment.
Chit Type (chitType):
- Different types of chit funds might have different returns due to varied conditions. The calculator adjusts the interest rate based on the chit type.
How the Calculation Works
1. Total Contribution:
- Formula:
Total Contribution=contribution×months
- This is the total amount a member has contributed to the chit fund over the entire period.
2. Chit Received After Discount (chitReceived):
- Formula:
Chit Received=Total Contribution−Bid Amount
- This is the amount you receive after winning the bid, accounting for the discount.
3. Interest/Dividend Earned (interest):
- Formula:
Interest=Chit Received×(Adjusted Interest Rate/100)
- Interest is calculated on the chit received using the adjusted interest rate.
4. Total Return (totalReturn):
- Formula:
Total Return=Chit Received+Interest
- The total return includes the chit received and the interest earned on it.
Flow of the Calculator:
Input Values:
- The user inputs the monthly contribution, total months, bid amount, and interest rate. The chit type adjusts the interest rate based on predefined conditions.
Calculations:
- The calculator computes the total contribution, chit received after the bid, interest earned, and the total return.
Output:
- The results are displayed in both textual form and as a bar chart, giving a clear visual representation of how the contributions, chit received, interest, and total return compare.
Example
Let’s assume the following values:
- Monthly Contribution: ₹5000
- Total Months: 12
- Bid Amount: ₹40000
- Interest Rate: 8%
- Chit Type: Fixed
Step-by-Step Calculation:
Total Contribution:
- ₹5000 × 12 = ₹60000
Chit Received After Discount:
- ₹60000 – ₹40000 = ₹20000
Interest:
- ₹20000 × (8% / 100) = ₹1600
Total Return:
- ₹20000 + ₹1600 = ₹21600
So, the total return in this scenario would be ₹21,600.
Conclusion:
This chit-fund calculator tool is built to calculate your chit-fund investment potential of returns and it also helps to calculate the estimated returns that you got by chit-fund.