Table of Content
Wondering What A Money Pool Is?
Money pools are also called chit funds and rotating savings and credit associations (ROSCAs). These types of saving schemes predominantly exist in developing countries, where access to credit is poor. Money pool remains a way of life and is a fundamental example of peer to peer lending or people helping people.
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How Does a Money Pool Work?
There are two methods of pooling money – offline and online. Let’s look at these methods in detail:
Offline Money Pool
In the offline method, a group of people, mostly friends, neighbours, and relatives, come together to pool money. They decide the amount that each member has to contribute every month to create a pool. Every month, based on the lot system or draw and sometimes even on mutual understanding, one member of the group receives the money pool amount. The process continues until all the members of the group receive the money at least once.
Example: Let’s suppose there are three people in the group – X, Y and Z – and they decide to contribute ₹500 each month. In the first month – X, Y and Z – contributes ₹500 each to create a pool amount of ₹1500. Based on mutual understanding or a draw, the first-month pool amount of ₹1500 is given to Z. For the second month, the pool amount of ₹1500 is given to Y, and in the third month, the money pool amount of ₹1500 is given to Z. Whether the member receives the pool amount for that month or not, the contribution of each member continues.
Online Money Pool
The Money Club is an online money pool platform, where the concept and procedure remain the same as the offline schemes. Instead of physically forming a group and pooling money, it is done through an online platform. The group is formed online, and people contribute the decided amount periodically for the duration the same as the number of participants. An open auction decides who takes the pool amount. During the auction, the members bid for the pool amount, and the one who wins is the one who agrees to claim the lowest pool amount. The winner needs to pay a commission to the Money Club separately.
Example: Let’s assume that a money pool scheme has 20 members, each contributing a monthly instalment of ₹500 to have a first-month pot of ₹10,000. Let’s assume the winning bidder wins ₹8,000 of the total pool value for that month; the ₹2,000 of the pool amount left is equally distributed among the other 19 members after the online money pool organiser’s fees are subtracted.
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6 Reasons Why Money Club is the Best Money Pool
These are a few reasons why Money Club is the best money pool tool for saving, borrowing and investing.
- Best Onboarding Process – The Money Club is 100% online. You can join The Money Club with just one round of telephonic verification and basic KYC (paperless), without getting bogged down with massive paperwork.
- Best Customer Journey –Once you build a good transaction history, you can easily move on to bigger and higher amount Money Clubs. Hence, the whole customer journey is a gamified experience.
- Best Commission Structures in the Industry – Unlike traditional chit funds, our commission structure is based on the performance of the subscriber. It starts with 4% of the club amount and it can go down as low as 0.5%.
- Best Model for High-Frequency Chits – The frequency of our chits are high. Unlike the traditional chit funds, we run clubs on a daily, 3-days, and weekly basis to help you earn returns in a short time or borrow when you have a need.
- Best in Risk Assessment – Our AI-driven online platform has robust underwriting algorithms. This helps in the transactional, demographic and verification of data of all the subscribers so that we are able to assign the best-suited clubs to them and prevent possible defaults.
- Best Network of Trusted, Verified Users – All our members go through a vigorous line of security and background checks before they join The Money Club. Moreover, each member only gets to proceed to higher clubs by building a good transaction history. This ensures that you are pooling money with a network of disciplined and trusted verified users.
Borrowing through chit funds is very easy and effective.
Chit Fund Schemes of The Money Club
- During the Pilot Club, all members go through verification, which includes basic KYC, Pilot Club performance and profile check.
- After the Pilot Club, verified members are invited to join the 6K3D Club. Here the maximum contribution of each person is 600 rupees and total number of members is 10.
- The next club invitation sent to members is for the 8K3D club. Here the maximum contribution of each person is Rs 800 and the total members are 10.
- The next club invitation that a member receives on his visit to the platform is for the 10K15D Club. In this level, maximum contribution of each person is 1000 rupees and total number of members is 10.
- After joining the 10K15D Club, members continue to receive club invitations of various club amounts and frequencies based on their track record.
Who Uses a Money Pool?
People have been pooling money for over seven centuries in India, and even today, it’s a very popular saving and borrowing scheme among the following people:
- Lower-income group
- People with bad CIBIL credit score
- People who don’t have access to banking facilities
- People worldwide living in poverty
- People looking to borrow or save money
Your Guide to what is Chit Fund and how it works
What are the Benefits of a Money Pool?
- Trusted Financial Community: People form groups with the people they trust, which they can leverage upon in times of contingent needs.
- Zero Documentation: Absolutely no paperwork is required to loan money from the money pool.
- Disciplined Saving: Involvement in a money pool group encourages people to set saving goals and meet them.
- Dual Benefit: Money pool duals up as a powerful borrowing cum savings instrument.
- Loans at a Cheaper Rate: The borrowing interest rate is determined by the participants and not any external agency, allowing them to set a rate much lower than that of the banks.
- Higher Yield: Money in such schemes earn higher returns on contributions than Fixed Deposits or Recurring Deposits.