Formulas Used
The following formulas are used for auction-related calculations:
Bidding Rate (annualized) = ((Bid Amount + Commission) × 12 × 100) / ((Chit Amount – Bid Amount – Commission) × (Total Months – Current Month))
Bid Amount = (Rate × Chit Amount × (Total Months – Current Month)) / (12 × 100 + Rate × (Total Months – Current Month))
For calculating the payable monthly installment and monthly returns:
Original Installment = Chit Amount / Total Months
Commission = Commission % × Chit Amount
Dividend per Person = Bid Amount / Total Members
Payable Installment = Original Installment – Dividend per Person
Monthly Savings = (Dividend per Person / Original Installment) × 100%
FAQ
#1. What is a Chit Fund Calculator?
A Chit Fund Calculator is a tool used to find the rate of borrowing through auction from a chit fund. It can also reverse-calculate the Bid Amount for a given loan rate, calculate the commission amount, find the total discount non-bidding members get, and calculate monthly returns from the chit fund.
#2. Can we calculate the total returns of a Chit Fund?
This calculator gives monthly returns or savings per installment. Total returns cannot be predicted in advance because the Bid Amount varies each month depending on how low members are willing to bid.
#3. Who will benefit from this calculator?
This benefits chit fund participants and managers. Bidders can find the borrowing rate for a given bid, or reverse-calculate the bid for a target rate. Managers can calculate the installment payable and share it with all members using the Share button.
#4. How are Chits calculated?
Each month an auction is conducted for the chit amount. The lowest bidder wins and receives the chit amount minus the bid amount and commission. The bid amount is distributed as a dividend among non-bidding members, reducing their monthly installment.
#5. What is the interest of a Chit Fund?
There are two types: the Bidding Rate (the annualised borrowing rate for the winner, similar to a loan interest rate) and Monthly Savings (the percentage of installment saved by non-bidding members that month, which accumulates as the total return over the chit period).
#6. What is Bid Amount in Chit Auction?
The Bid Amount is the discount offered on the total chit value during an auction. The highest bidder wins and receives: Chit Amount − Commission − Bid Amount. The bid is then split equally among all members as a dividend, reducing their monthly contributions.
#7. What are the returns from a Chit Fund?
Returns come as a monthly dividend. Dividend = Last period's winning Bid Amount ÷ Total members. Members pay their installment after deducting this dividend each month.