What Are Tandas and How Do They Work?
For most people, saving money is hard and when they can’t save for a specific purchase or event they end up turning to credit cards and loans to get what they want. This isn’t the ideal solution as credit cards come with hefty interest rates and can cost a lot over the long term. This is why more and more people are turning to tandas to borrow money.
What Is a Tanda?
A tanda is a Latin American term for an informal group of friends or family that gather money each week or month and lend it to each member of the group in a set order at a specified time. It’s a no-interest, short-term loan among friends.
Many cultures have tandas and there are over 200 different names for them across the globe. In English, they are called a partnerhand, a stokvel in South Africa, and a cundinas in Mexico.
What Are the Rules of a Tanda?
Each tanda can have its own specific rules for how much to give and when, because they are operated by individual groups and are informal. But even with these changes in the specifics, most of the time a tanda will be governed by the same basic rules.
As an example, if a tanda is created between 10 friends and family members, each member will agree to give a specific amount at a specific time. So, this group of 10 may decide to give $100 a month for 10 months. Each member of the tanda would then get $1000 (10 x 100) over the course of the 10 months, with their place in line to receive the money pre-determined by the group.
What You Should Look for in a Tanda
A tanda is an agreement between friends and family. The biggest consideration when joining a tanda is determining if you trust the people in it. If you have never done a tanda before or are forming a tanda with a new group of people, it is wise to start small with an amount that you can afford to lose.
Once people prove that they will follow through with their commitment to the tanda, you can increase the amount you collect and distribute.
Because there is no government regulation and this is completely informal you don’t have much recourse if people fall through.
Even with that risk, this can be an excellent way to save or loan smaller amounts of money with no interest or fees — if you are working with a group of people you trust.
Other Benefits of a Tanda
The other big benefit of a tanda is the social aspect. Many people find that getting together every other week or every month with their tanda group to be an experience where they build lifelong friendships. Because of their structure, tanda groups can also help members that are facing a short-term need.
Online Tanda Groups
There are now online tanda groups like eMoneyPool. This tanda service organizes people across the globe to help each other with tanda pools. They guarantee your payout and charge a fee between two percent and eight percent depending on where you are in the payout schedule. Even though eight percent seems steep, it is still often a lot less than a traditional credit card.
If you can wait till the end of the payout schedule then your fee goes down. People using this service then receive ratings so that others can determine if they pay on time.
Another interesting feature of eMoneyPool is that they report your on-time payments to the Experian credit bureau, which can help improve your credit score.
Should You Use a Tanda?
If you have a local group of family and friends who you would trust in a tanda, then it can be a good way to build both community and get short-term loans and save money. With the online version, if you don’t need the money in the short and medium term, you would be better off setting up automatic transfers to your savings accounts on payday — especially if you are saving in one of the online-only banks that can pay up to two percent interest. SFGI Direct is a particularly good choice for this. Ultimately, tandas can be a good vehicle for short-term, no interest loans between friends and can help a community of people get ahead.
Above all, you have to trust the people that you are in a tanda with.