Know What Happens When You Miss An SIP Instalment

SIP stands for Systematic Investment Plan. It is a disciplined and regular way of making investments in mutual funds. SIP includes a series of consecutive payments of predetermined amounts made after a defined period. It can be weekly, monthly, quarterly or even yearly. 

If you are wondering how SIP works, let us enlighten you. You can avail a systematic investment plan as per your goals and requirements. To make this scheme work, you can direct your fund house to make regular deductions from your bank account. There is no need to take the responsibility of paying the installments since the amount gets directly debited from your account by the fund house, making the whole set-up hassle free for both the parties.

For instance, you availed a SIP mutual funds, and your installments are due for 11th of every month. The amount will automatically get debited from your registered account, on the 11th of every consecutive month for the total period of investment.

Failing To Pay A SIP Installment

If you have missed one installment and are worried if your investment scheme will get dismantled, then you are wrong. Your SIP will not go inactive if you miss out on an installment or two, nor will you have to pay it in the following month. If there are not enough funds in your bank account to honor the payment and you forgot about maintaining the balance on the date, you will not even be penalized by the fund house. You can skip out on a maximum of 3 consecutive installments of SIP without any risk of turning it inactive. All you will have to face is charges by your bank for not maintaining sufficient funds in the account.  You can be penalized for not having the cash for Electronic Clearing Services (ECS) with any amount from Rs 150 to Rs 750, varying from bank to bank.

Also read: Quick Guide To SIPs    

What To Do If You Missed An Installment?

In case you have missed an installment, there are a few things you can do to avoid penalties and keep your investment plan safe.

• If you are well aware of the crunch and know that you will not be able to regain a strong financial hold in the coming 2-3 months, you can opt to pause your SIP. Pausing means temporarily discontinuing the SIP to avoid discontinuation of the scheme. Under this option, you can pause the SIP for a period of 3 to 6 months, following which it will start operating as before.
• Another important point to be considered here is that not every Asset Management Company provides the option of pausing SIP. So, before you invest in one, it is advised to research thoroughly; one can also consult a fund advisor before proceeding.
• If your fund provider has this option, then you can submit a plea by the traditional paper mode to pause your scheme 30 days before the next date of payment, and 10 days prior if you go with online methods. This facility of pausing is available only twice during the entire course of the systematic investment plan.
• To be regularly updated about your payment dates, you can register your email address and phone numbers. Following that, you will receive a reminder from the fund house a few days prior to the date of payment of your SIP. It will help keep you updated about the date of payment and will even avoid the unnecessary penalties and charges imposed by your bank for not having enough funds to get through the auto debited transactions.

Conclusion

So, all you have to do is become a little cautious with money matters and payment dates, to make the most of your investment plans. Plan ahead to avoid any inconvenience and consult a financial advisor if you feel the need for professional advice.

Must read: How SIPs Benefit From the Power Of Compounding?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.