One of the best ways to invest in mutual funds is through a SIP. With SIPs, the investor must make a one-time investment into a mutual fund plan of their choice at an amount they can afford. Additionally, customers must connect their savings accounts to their SIP. On the SIP’s due date, the money is then charged monthly.
Investors going through a financial crisis don’t have to let their ECS mandates lapse for lack of funds, according to mutual fund AMCs, investment consultants, and broking platforms. Instead, they can choose the “SIP pause” option until their financial situation improves.
The pause function lets investors temporarily stop their SIP instalments and restart them later without incurring fees.
What Happens If You Miss A SIP Installment?
There may be times when a financial hardship prevents you from making your mutual fund SIP instalment payments. There is no need to be concerned because SIP in mutual funds is a long-term investment tool, and taking a vacation if you have other financial obligations is very acceptable.
While mutual fund companies don’t charge late fees for a few SIP instalments, your SIP will automatically terminate if you miss three consecutive payments. Additionally, your bank will fine you if you fail to honour the auto-debit payments.
If you are having difficulties paying your payments, there is a better method to skip just a few SIP instalments. If you anticipate a future cash need, you can halt your SIP by writing a SIP Stop Request to the equity investment firm at least 30 days in advance. The request can be made offline or online using an application form.
You can start a new SIP when you feel secure financially and ready to resume your SIP payment.
How To Avoid Missing SIP Payments?
- Try raising the balance before the SIP payment due date by depositing it to the bank account if your bank balance falls below what you need for your SIP payment.
- You can discontinue your SIP if you are sure you will be unable to make the SIP payment owing to an unavoidable financial obligation. You can quickly start the payment again whenever you believe that your financial hardship has passed. If you do not redeem your previous SIPs, they will continue to increase throughout the same period.
- One of the alternatives you have is to pause your SIP investment. Especially if you anticipate having cash flow problems and high costs. Remember that you can halt your SIP payments for up to a set number of instalments with any mutual fund You can stop SIP instalments with the mutual fund house for a limited time before they resume automatically. When you run into financial trouble, keep in mind to see if the AMC offers the same option and to halt your SIPs for a few months.
Things To Look Out
One or two SIP payments missed won’t hurt your corpus. Regarding your late SIP payments, there are two things you need to remember. As follows:
- The mutual fund house will cancel an investor’s SIP investment if they have missed three consecutive SIP payments.
- The bank may impose a penalty when the investor misses a SIP payment because their bank account is low. It’s known as dishonouring the money when you do this. In situations like this, a charge is involved.
Although Mutual Fund firms don’t charge late fees for SIP payments, your SIP will automatically cancel if you miss three consecutive payments. Additionally, your bank will fine you if you fail to honour the auto-debit payments. Therefore, if you anticipate a future cash shortage, it is advised to cancel the SIP by filing a request at least 30 days in advance. Later, whenever you feel comfortable financially, begin a new SIP.