Finance

WHAT HAPPENS WHEN YOU MISS SIP PAYMENT?

Have you ever wondered what would happen if you fail to make an SIP (Systematic Investment Plan) payment? Missing an SIP investment is quite common. You might be facing a financial crunch due to which youmight not maintain enough balance in your bank account. If you have missed one instalment and are concerned that your investment scheme might get dismantled, then you are wrong. Assuming that you already know what is an SIP, let’s find out what happens if you miss an SIP payment and how you can avoid such situations.

What happens if you miss an SIP payment?

To your relief, your SIP investment will not go inactive if you miss out on an instalment or two, nor will you have to pay it in the following month. What’s more, you won’t be penalized by the fund house if there are not adequate funds in your bank account to honour the payment. However, one must note that they can skip out on a maximum of 3 consecutive SIP payments without any risk of turning it inactive. All one faces is that charges slapped by your bank for not maintaining sufficient funds in the account.  You can be penalized for not having the cash for ECS (electronic clearing services) with any amount varying from Rs 150 to Rs 750, depending on your bank.

What things should you consider as an investor?

Though missing out on one or two SIP payments would not have any adverse outcome, here are two things that you should remember about missing your SIP instalments –

  • If you miss three consecutive SIP instalments, your SIP investment can be terminated by the mutual fund house
  • Your bank may charge you a penalty when your account balance is low, which leads to missing out on the SIP payment. This is called dishonouring the payment, and a charge is involved in these cases.

How to avoid missing SIP payments?

Here’s how you can be a smart investor and avoid missing out on your SIP payments in the following ways –

  • Always keep an eye on your bank account balance. If the balance gets low and insufficient for meeting your SIP payment, try to increase the balance before the SIP due date by making deposits into the bank account.
  • If you are aware that due to unavoidable financial commitments you’d face hefty expenses and thus, would not be able to pay the SIP instalments, then you can stop your SIP. However, experts recommend pausing your SIP instalments than stopping them altogether. All you have to do is, log into your SIP portfolio and pause the SIP payments. Later on, you can restart the SIP payments when the cash crunch is over. Meanwhile, the earlier SIP investments would continue to grow,provided that you don’t redeem them.Several fund houses permit you to pause your SIP instalments up to a definite number of instalments or for up to a definite period, after which they start automatically.

Make sure to check with your fund house or AMC if they provide this option. Though experts frown upon the concept of pausing or stopping your SIP investments, do the needful as required. You can also use a mutual funds SIP calculator or an SIP calculator to understand the future value of your investments. Happy investing!

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