12 Percent Club – An Honest Review

Hello folks, I’ve been using the 12 Percent Club app for a while now and in this post I’ll share my honest review of the app.

12% Club is an app where you can borrow and lend money at an interest rate of 12% ( Upto 12 percent for Retuns ). I’ve just tried the lending side of the app.

Basically the app receives money from investors and lends it to multiple people. The minimum investment amount is ₹1000.

Since the money is lent to multiple people the risk quotient is low, however one might lose money if the borrower doesn’t pay back the money.

Why do I invest in spite of the risk ?

Non Performing Asset is very common in business. In fact the bank in which you own an account also has NPA. However, there’s an healthy NPA. Most well known banks have an NPA of 1.5 to 2 percent. Many people default on credit cards but still you receive myriad of calls from bank folks asking to sign up for credit card. The Math is simple, as long as NPA is low and you are achieving returns above inflation rate you are not losing much. Banks wouldn’t have made profit if there weren’t few defaulters. Because things like late payment charges and multiple types of other interest add up to the borrower and banks actually end up profiting.

So if you invest thousand rupees and lose about twenty rupees but still make decent returns then your investment is safe. 2 percent of 1000 is 20 therefore 20 rupees.

When you add the money, it takes upto four days to generate returns. You make return from the fifth day. The returns get credited daily and you can withdraw at any time. When you withdraw it takes two days (48 hours) for the amount to get settled to your bank, just like stocks.

Is this a legal app ?

Well, the app says it is RBI approved Peer to Peer Non Banking Financial Company ( P2P NBFC ). Authentic finance YouTubers mentioned the same too about this. The maximum amount you can add is 10 lakh rupees at the time of writing this post. And the minimum withdrawal amount should be greater than one rupee.

The journey so far ?

I faced hiccups with KYC when I used the app on iPad but on my mobile phone it did work perfectly fine.

The app doesn’t disclose as to how the money is divided among the borrowers and this is the common complaint of many users. Maybe they are doing this to prevent competition. As long as the NPA threshold is below two percent there shouldn’t be any concerns is what I feel.

If borrowing is at 12% and returns are at 12%, the net profit the company makes should technically be zero. I feel that the initial four days of time before generating returns and 48 hours for the withdrawal credit can be one area where the app is making money because 4 plus 2 is 6 days. Also there might be late payment fees or EMI system where the app is actually making money from.

Not to forget Play Store and App Store commissions. Also since this is owned by BharatPe, this might make merchants get drawn towards BharatPe as they can get easy loan. This can increase market share and revenue.

When I used PayTm for this blog for transactions, PayTm used to charge a fee inorder to credit the amount to the bank. Also when my customers pay via credit cards there is some sort of deduction and when international cards are used the rate is even more.

When you have decent market share there are n number of ways to make money. Because even the PayTm soundbox has a fee. Maybe BharatPe has similar plans.

Most financial institutions have a certain amount of excess unused capital given to stock traders and hedgers within the organization. So if these people use the overflow to generate additional revenue then upto 12% returns to investors shouldn’t be a trouble. Because average index fund return is also around 12 percent globally. And during market crash Hedge funds lose less than index funds therefore the name Hedge. This happened during 2008 market crash. There are employees tracking markets 24/7 and therefore they exit early losing less. And when they make money these big people are the ones who decide the Open Interest technically and play wisely.

Don’t take my assumptions seriously. However, what I’ve mentioned is somewhat close to how the real world financial system work. I was searching for Data Science jobs on Indeed few days ago and major investment banks wanted traders with experience. Therefore, I came up with the above paragraph. Also most insurance companies too do the same.

Upto 12 percent return per annum with daily credit is actually a reality now. However, there is associated risk.

Wanna try the app ?

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Thank You 🙂

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