What happens if you miss a SIP installment?
SIP is when you invest a fixed amount of money in a mutual fund at a fixed time (usually a month). The SIP amount gets deducted through automatic debit from your bank account. But what happens if you miss the installment?
When you first start a SIP (Systematic Investment Plan), you think that investing this money is very easy and safe. But once, I missed an installment due to a lack of money in my bank, and then I came to know what the consequences could be. I learned from my own experience what happens if you miss an SIP installment and how to avoid it or how to pay it.
- No penalty from mutual fund houses:
- If you miss one or two installments, the mutual fund company does not charge you any penalty. Your existing investments will not be affected, and they will continue to generate returns. But remember, the amount you miss can affect the growth of your investment.
- The bank may levy a penalty:
- If there is insufficient money in your bank account and the automatic mandate fails, the bank will charge you a penalty. This penalty can range from Rs 100 to Rs 750, and the rate depends on the bank. For example, if your bank charges Rs 500 per missed installment, and you have three SIPs, you may have to pay a penalty of Rs 1,500!
- SIP will be canceled if you miss three consecutive installments:
- If you do not pay installments for three consecutive months, the mutual fund company may cancel your SIP. After that, you will have to start a new SIP again, which can lead to a loss of time and money.
- Impact on investment:
- The main advantage of SIP is that you can buy units at a lower rate when the market is fluctuating. But if you miss an installment, you lose that opportunity, which can reduce your long-term returns.
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How to pay missed SIP installment?
There is no need to panic if you miss an installment. I have found some simple steps that can help you:
- Invest money in lump sums:
- If you have missed one or two installments, you can invest that money in lump sums. For example, if your monthly installment is Rs 2,000, you can deposit Rs 2,000 in your bank account before the next SIP date and invest it. This will help you to stay on track.
- Contact the fund house:
- Contact your mutual fund company and inquire about the missed installment. Some companies allow you to pay the installment directly. You can call your Mutual Fund Customer Care, and they will provide you with the option of online payment.
- Restart the SIP:
- If your SIP has been canceled, start a new SIP again. You will need to update your bank account mandate for this.
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How to avoid missing installments?
Here are some tips that I have found useful to avoid missing installments:
- Pause SIP:
- If you already know that you will not have enough money in the coming month, then opt for the option to pause the SIP. Pausing SIP can be approved in 7 to 25 days, so plan. I paused one of my SIPs for 15 days and avoided the penalty.
- Check bank balance:
- Make sure that there is enough money in your bank account before the SIP date. I check my bank balance on the 5th of every month so that my installment goes smoothly on the 10th.
- Change dates:
- Align your SIP installment date with your salary date so that the money is available. I made mine the day after my salary, and now I never have any problems.
Steps to Recover a Missed SIP Installment on Groww App
Step 1: Go to the Mutual Funds dashboard on the Groww app.
Step 2: Select the fund for which you missed the SIP installment.
Step 3: Click on “One Time” investment option.
Step 4: Enter the same amount that is deducted monthly for your SIP.
Step 5: Click on “Invest” and enter the OTP sent to your registered mobile number and email ID.
Step 6: Press the “Confirm” button and complete the payment. You’re done!
Note: Some funds may not allow one-time investments, so check with your fund house.
Answers to some important questions
- Will my credit score be affected?
- No, missing SIP installments will not affect your credit score, as SIPs are not loans. I had asked the bank about this, and they said it does not affect your credit.
- What can I do if I miss some SIP installments?
- You can invest the money in lump sums or pause the SIP and continue. I invested Rs 5,000 for my missed installments in one go, and my target remained on track.
- What is the process of pausing an SIP?
- Go to your mutual fund app or website, select the ‘Pause SIP’ option, and make a request 30 days in advance.
I missed my SIP installment once and had to pay a penalty. However, I learned that this problem can be avoided by planning. If you are also investing in SIP, keep an eye on your bank balance and stop the SIP if necessary. By doing this, you will not have to worry about penalties or SIP cancellation. From my experience, a little care will keep your investment safe. If you have any further doubts, do ask me—I will explain it to you in simple terms!
FAQ for Missed SIP Installment:
1. What happens if I miss an SIP installment?
Missing an SIP doesn’t incur a mutual fund penalty, but banks may charge ₹100-750 per failed auto-mandate. Three consecutive misses can cancel your SIP.
2. How can I pay a missed SIP installment?
You can pay missed SIPs as a lump sum through your mutual fund app/website or restart the SIP with an updated bank mandate after contacting the fund house.
3. Are there penalties for missing an SIP Installment?
No penalty from mutual funds, but banks charge ₹100-750 for insufficient funds. Missing three months consecutively leads to SIP cancellation.
4. How do I pause an SIP to avoid penalties?
Pause your SIP via your investment platform (7-25 days approval). Plan ahead and ensure sufficient bank balance to avoid fees.
5. Will a missed SIP affect my credit score?
No, a missed SIP doesn’t impact your credit score as it’s not a loan, but it may delay your investment growth.