Difference Between Sanction and Disbursement in Home Loan

 Buying a home is a significant milestone, and for most people, a home loan is essential to finance it. However, the loan process involves multiple stages, with two crucial steps being loan sanction and loan disbursement. Understanding these terms helps borrowers make informed financial decisions and ensures a smooth home loan approval process.

Let’s break down these two terms and explore how they impact home loan applicants.

 What is Loan Sanction?

Loan sanction is the stage where the lender approves your loan application after evaluating your eligibility, income, credit score, and other factors. However, at this point, the loan amount is not yet transferred to your account. Instead, you receive a sanction letter, which outlines the following details:

✅ Approved Loan Amount – The maximum amount the lender is willing to provide.

✅ Interest Rate – Fixed or floating rate applicable on your loan.

✅ Tenure & EMI Details – Duration of repayment and estimated monthly installments.

✅ Repayment Terms – Conditions regarding prepayment, foreclosure, and penalties.

At this stage, the lender may request additional documentation before moving to the next step – disbursement.

💡 Example: A borrower applies for a ₹30 lakh home loan. The lender reviews the application and approves the loan, issuing a sanction letter but not transferring the money yet.

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 What is Loan Disbursement?

Once a loan is sanctioned, the next stage is loan disbursement, where the approved loan amount is finally transferred to the borrower or directly to the property seller/builder. Disbursement occurs after property verification and legal formalities are completed.

There are three types of disbursement:

✔ Full Disbursement – The entire loan amount is credited at once.

✔ Partial Disbursement – The lender releases funds in phases, depending on construction progress (for under-construction properties).

✔ Stage-Wise Disbursement – Used for self-construction or builder-led projects, where payments are made after each phase is completed.

At this stage, EMI payments begin as per the loan agreement.

💡 Example: After verifying the borrower’s property documents, the lender transfers ₹30 lakh to the builder or the borrower’s account, allowing them to proceed with the purchase.

For More Depth : Read Home loan Disbursement Process

 Key Differences Between Loan Sanction and Loan Disbursement

 Why Understanding This Difference is Important?

Many borrowers assume that loan approval (sanction) means they can immediately use the funds, but disbursement happens only after the lender completes final checks. Knowing this helps borrowers:

✔ Plan home purchases efficiently

✔ Arrange necessary documents beforehand

✔ Avoid delays in property transactions

✔ Ensure seamless loan processing

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 Aavas Financiers – Your Trusted Home Loan Partner

Getting a home loan shouldn’t be complicated! Aavas Financiers Ltd. is India’s leading Housing Finance Company, serving over 2 lakh happy customers with its vast network of 400 branches across 14 states.

 🏡 Why Choose Aavas Financiers?

✅ Quick loan sanction & fast disbursement.

✅ Affordable interest rates & flexible repayment options.

✅ Hassle-free documentation & customer-friendly service.

✅ Loan solutions for home purchase, construction, MSME businesses & loan against property.

If you’re planning to buy your dream home, apply for a home loan with Aavas Financiers today! 🚀