Chit Fund vs Personal Loan: How to Use Chitti Money | Smart Money Management | Revanth Chalamala

In this video excerpt from SocialPost Finance, Nihal interviews Certified Wealth Manager Revanth Chalamala regarding critical personal finance decisions. The primary query discussed is whether a friend should use a ₹10 lakh chitti (chit fund) auction amount to pay off a ₹9 lakh bank loan taken at 9% interest, which is implied to be a home loan.

Key Insights from the Discussion:

• Understanding Loan Tenures: Home loans are designed with longer tenures to provide comfort to the borrower and ensure the repayment does not become an undue burden. While some individuals are psychologically driven to finish the debt early, even resorting to extra payments (like 13th-month payments), this may not always be the wisest approach.

• The Risk of Job Instability: The wealth manager questions the assumption that a high-salary job (e.g., ₹2 lakhs for a software employee) is permanent, noting that a defined retirement age is typically around 55, and unforeseen events like accidents or disability can eliminate income sooner.

• Financial Priorities: Clearing a low-interest home loan using chitti funds is generally not the right idea. Instead of rushing to pay off the home loan, the borrower must first build a sufficient financial corpus.

• The Need for Liquidity: Before investing or rushing to clear debts, the individual must ensure they have readily available liquidity, such as funds to cover at least three months of their expenses.

• Strategic Advice for the Chit Fund: Since the chitti has already been started, the friend should take the money at the last possible moment to maximize the potential savings or interest (estimated to be around 0.8% to 1%).

• Post-Liquidity Investment: Once the emergency liquidity is secured, the next best step is to accumulate funds and invest in options like mutual funds. Using chitti money to pay off the home loan offers little advantage if the interest rate difference is minimal.

• Long-Term Planning: The speakers emphasize that individuals should strive to achieve their retirement goals by the age of 40 to 45. True financial clarity often comes late (around age 40) when people realize that expenses will rise while salary growth slows down, leading to difficulties if savings are not already in place.

The discussion also briefly touches upon gold ornaments, noting they should only be purchased if they are intended to be worn, as their value is subject to depreciation before appreciation.

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Chit Fund vs Personal Loan: How to Use Chitti Money | Smart Money Management | Revanth Chalamala
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#Finance #Investing #MoneyTips #SocialPostFinance #Socialpost

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