Advance Disbursement Facility & Pre-EMI

Advance Disbursement Facility

The advanced disbursement facility is one of the banking terms that is closely associated with home loans in general. When a house is under construction, only a partial amount of the total investment is given by the lender to the receiver. And the rest of the amount is done at certain periodic intervals. And you would receive the full amount after the construction.

However, there are instances when the lender of the loan may be interested in disbursing the entire amount of the loan before the construction of the building is complete. This advance transfer of payment or credit is termed as Advanced Disbursement Facility. The removal of the loan amount is made only after the request of the buyer. If the loan lending company is convinced, then it will initiate the disbursement before the completion of the house.

PRE-EMI

Pre-EMI is an option that is available for would-be homeowners in the phase of construction of their house. The entire amount of the loan amount is not disbursed at once; instead, a part of it is transferred at specific intervals.  You will start repaying for the principal amount at the time when you have received all the loan amount. Before this, you would only be paying for the interest.

Advantages and Comparisons

1. When you opt for ADF, you would need to pay the EMI for the entire tenure of the home loan, but in case of PRE-EMI, you need to pay for the whole of the loan tenure as well as the construction period too.
2. The delay in the construction of the building doesn’t affect the amount you need to repay to the bank or lender. Whereas in case of a PRE-EMI scheme you would need to pay the interest for the period when the house is under construction.
3. The PRE-EMI scheme of lending is costly as compared to the ADF. And in the PRE-EMI system, you won’t get any tax benefits too until your house is ready. ADF is a very laid back process with limited compliance.
4. With ADF, the developers or builder get the money at one go.
5. The loan repayment to the lending organization takes place at a faster rate with ADF, and the same takes more time in case of PRE-EMI.

The choice of opting the disbursements from the banks depends upon your intent. If you are getting a property and have made up mind to sell it shortly, then PRE-EMI is considered better, and if you want to keep it as an asset, then AFD is better.