One of the most common questions investors ask before taking a loan against mutual funds is: “What will happen to my SIPs?”

It is a valid concern. If you have been running SIPs for years and have built a disciplined investment habit, you do not want a loan to disrupt that.

The short answer: your SIPs continue as normal. But let us explain exactly how this works.

SIPs and Lien Marking Are Independent

When you take a loan against mutual funds, a lien is marked on specific units in your portfolio. This lien restricts you from selling or redeeming those particular units.

But a SIP is about buying new units, not selling existing ones. These are completely separate actions.

Here is how it works:

• Existing units (the ones you pledged) → Lien is marked. You cannot redeem these.
• New SIP units (purchased after the lien) → These are fresh units. They are not covered by the lien. You can redeem, switch, or do anything with them.

Your SIP mandate with the bank continues to debit your account on the scheduled date, and new units are allotted as usual. The lien on older units has no effect on this process.

A Practical Example

Let us say you have been running a SIP of ₹10,000/month in a mutual fund for 3 years. You have accumulated 2,000 units.

You decide to take a loan against 1,500 of those units. Here is what happens:

Every month, your SIP adds more free units to your holding. These new units are completely yours to manage.

What About SIP in the Same Scheme?

Yes, you can continue a SIP in the same mutual fund scheme where some units are lien-marked. The new units from your SIP are recorded separately and are not automatically added to the lien.

However, if you want to pledge these new units as additional collateral (to increase your loan amount, for example), you would need to make a separate pledge request.

Can the Lender Stop Your SIP?

No. The lender has no control over your SIP. The SIP is an instruction between you and the AMC (or the RTA), triggered by an auto-debit mandate with your bank. The lender is not part of this arrangement.

The lender can only:

• Mark or remove a lien on specific units
• Request redemption of lien-marked units if you default

They cannot modify, pause, or cancel your SIP.

Should You Continue Your SIPs During a Loan?

This depends on your financial situation, but in general: yes, absolutely.

Here is why:

1. Discipline Matters

SIPs build long-term wealth through discipline and rupee cost averaging. Stopping your SIP to service a short-term loan disrupts this discipline. If the loan is for a few months, it is usually better to continue the SIP and pay loan interest, rather than stopping investments.

2. New Units Build Your Free Portfolio

Every SIP instalment creates new, unencumbered units. These give you additional flexibility — you can redeem them if needed, or pledge them for additional collateral. They are a growing safety net.

3. You Might Forget to Restart

If you pause your SIP, there is a real risk of not restarting it on time. Life gets busy, and the longer you pause, the harder it is to restart. The cost of a few months’ gap in SIP can be significant over a long time horizon.

When You Might Pause SIPs

If the loan EMI or interest payment is straining your monthly cash flow, and you cannot comfortably pay both the SIP and the loan interest, it may make sense to temporarily reduce or pause the SIP. But this should be a last resort, not the default choice.

What About Step-Up SIPs or SIP Top-Ups?

Step-up SIPs (where you increase the SIP amount annually) continue as scheduled. The lien on existing units has no impact on future SIP amounts or increases.

What Happens When You Repay the Loan?

Once you repay the loan in full:

1. The lender requests the RTA to remove the lien
2. The lien is removed (typically within 1-3 business days)
3. All your units — both the previously lien-marked ones and the ones accumulated through SIPs during the loan period — are completely free
4. You have full control over your entire portfolio again

Many investors find that they actually end up with more units than when they started the loan — because SIPs kept running throughout and added new units every month.

Common Scenarios

“I have SIPs in 5 different funds. I am pledging units in only 2 of them.”

Your SIPs in all 5 funds continue normally. The lien only affects the specific units pledged in those 2 funds. SIPs in the other 3 funds are completely unaffected, and even the SIPs in the 2 pledged funds continue to create new, free units.

“My SIP date is the same as my loan interest payment date.”

Both will proceed independently. Your SIP debit and loan interest payment are separate transactions with different beneficiaries. Make sure your bank account has sufficient balance for both.

“I want to increase my loan amount. Can I pledge the new SIP units?”

Yes, in most cases. You can request the lender to mark a lien on the additional units accumulated through SIPs. This would increase your collateral value and potentially allow you to draw a larger loan amount.

Key Takeaways

• SIPs continue as normal when you take a loan against mutual funds — they are not affected by the lien
• New units purchased through SIPs are free and unencumbered
• The lender cannot stop, modify, or control your SIPs
• Continuing SIPs during a loan period is generally recommended for long-term wealth building
• You can run SIPs in the same scheme where some units are lien-marked
• After loan repayment, all units (old and new) are fully free

Taking a loan against mutual funds does not interrupt your investment journey. Your SIPs keep running, your wealth keeps building, and your lien-marked units keep earning returns. It is designed to be a minimal-disruption way of accessing liquidity — and that includes leaving your SIPs untouched.