Archive · 3 Aug 2026
Choosing Loans vs. SIP Pause in Financial Emergencies
When something unexpected happens, like a medical bill or a job loss, people need cash fast.
Experts say the best way is to have a savings cushion that covers 3 to 6 months of living costs.
If you still need money, a low‑interest loan that uses your mutual‑fund shares as collateral is usually cheaper than selling those shares.
Selling shares can cost you extra money and stop your money from growing.
If the loan is expensive, like a credit‑card loan, it might be better to pause your regular investments for a short time.
The key is to keep a good emergency fund and plan how you will pay back any loan.
This helps you keep your money growing over the long run.
Experts recommend keeping a 3–6 month emergency fund before deciding on loans or SIP pauses.
Redeeming mutual funds or stopping SIPs can break compounding and trigger exit loads or taxes.
Low‑cost loans, especially loan against mutual funds (LAMF), are often cheaper than high‑interest credit card or personal loans.
If a loan’s interest is 20–30 % per year, pausing the SIP may be the better option.
Building an emergency fund and having a clear repayment plan are key to avoiding difficult choices.
- Who
- CA Divam Sharma, Shashank Udupa, and Aditya Agarwal
- What
- Advice on whether to take a loan or pause a SIP during emergencies
- When
- General guidance applicable at any time of financial need
- Where
- India, within the mutual‑fund investment context
- Why
- To preserve compounding, avoid high borrowing costs, and maintain long‑term wealth growth
- Emergency fund recommendation
- Cover at least 3–6 months of expenses
- Loan vs SIP cost
- High‑cost debt > temporarily pausing SIP
- LAMF interest rate
- 9–11% per annum
- Compounding loss example
- Stopping a Rs 20,000 monthly SIP for one year could grow to ~Rs 19–20 lakh over 20 years
- Repayment plan importance
- Clear plan needed to avoid default and fund liquidation