SIP Pause or Close: If you suddenly face a financial crunch, which option is wise to choose?

SIP Pause Vs Close: In today's time, SIP has become one of the favorite options of investors. Investment in mutual funds is done through SIP. SIP can be started with a small saving and in the long run, a huge fund can be created through it. This is the reason why in today's time people run many SIPs simultaneously according to different goals.

But suppose you started a monthly SIP of Rs 5,000 to 10,000 and suddenly a condition came in front of you that it became difficult for you to continue the SIP, then what will you do in this situation? In such a situation, you will have two options, first, you close the SIP and withdraw the money and the second option is that you stop the SIP for some time i.e. pause it and when the situation improves, then start it again. Let us tell you which decision will prove to be better for you in such a condition.

First, understand what is SIP Pause.

By using this facility during the financial crisis, you can pause your scheme midway instead of closing it completely. Earlier this facility was for 1 to 3 months, but now some fund houses have extended it to 6 months. To avail of this facility, you have to submit a request to the Asset Management Company i.e. AMC to 'pause'. While submitting the request, you have to see for how many days your company provides a pause facility. If the company approves your request, then the SIP installment will not be taken from you for a certain period. But after the 'pause' period is over, the SIP installment will automatically start getting deducted from your account.

When to choose SIP Pause and when to close it?

If you face a medical emergency, job loss, or sudden big expenses or your financial responsibilities increase due to marriage, buying a house, or any other family-related event and you feel that you will not be able to continue the SIP installment right now, but can start it again after some time, then in such a situation you can choose the option of SIP Pause and resume your investment after some time. But if the financial crunch is such that you do not know when your conditions will become normal, then only you can decide to stop the SIP.

After closing the SIP midway, you have no hope of achieving your goal, but by pausing the SIP, you get relief from paying the installment for a few days, as well as your investment goal is not affected by it. If the market sentiments improve after the pause period, then you can also get the full benefit of it. The best example of this was seen by people during the COVID-19 time. At that time, due to the financial crisis, many people took advantage of the pause facility and later started it again.