Loan Disbursement can be categorized as the act of paying or disbursing money. In case of loan disbursement, it would specifically mean that the amount is to be disbursed as a loan which will be paid back by the lender on mutually agreeable terms.
Loan Disbursement Applicability
Loans are generally available for different kinds of needs of the customers. These loans are disbursed after conducting the necessary paperwork. This disbursement of loans is done after satisfying the eligibility criterion of the borrower and is available under the following categories:
- Personal Loans
- Credit Card Loans
- Home Loans
- Car Loans
- Two- Wheeler Loans
- Education Loan
- Loan against insurance schemes
- Loan against Fixed Deposit
- Loan against Mutual Fund
- Loan Disbursement Process
For an understanding of the loan disbursement process, a reference of personal loan disbursement can be considered. The process is relatively similar in other kinds of loan disbursements too.
Processing of the Loan Application
The loan application is generally processed within 24 hours to a week depending upon the loan category and the requirement. The credibility of the information submitted by the applicant also acts as a deciding factor in this case. As the loan stands approved, the bank will usually provide a cheque that the borrowers can collect from the bank branch. In most cases, the banks also credit the amount through NEFT transfer.
Disbursal of the Loan Amount
It is also seen that the actual amount of loan disbursed at times varies from the amount that has been sanctioned in the agreement. The loan sanction letter is intimation from the lender’s end that the person is eligible for a loan which is always subject to some conditions. The loan disbursal is however based on some additional formalities that the borrower has to fulfil when the loan has been sanctioned. The amount of loan that has been sanctioned depends upon factors like the type of loan, processing fee, any kind of upfront payment and service tax applicable.
Bank Confirmation
The bank in all cases will send a confirmation letter after disbursal of the loan amount has been done. This is either done through an email or as a hardcopy in the welcome kit. The bank also provides an EMI calendar which helps the borrower in calculating the principal to the interest ratio which is applicable on the loan amount.
Important Considerations
In case any change in your employment occurs during the duration of loan repayment, it is advisable to communicate the same to the bank. Another worth remembering point is that the loan can also be transferred from any leading organization to another. However, a penalty amount is charged for the same. The rate of interest that is charged on any kind of loan depends upon monthly income, the credit score of the borrower and the duration of loan repayment.
Types of the Loan Disbursement
Loan disbursement can be categorized in the following subheads:
- Full disbursement
- Partial disbursement
- Advance disbursement
Full Disbursement
Once the person who desires to apply for the loan submits all the necessary paperwork and does the initial 10 to 15 percent down payment, the lender will disburse the complete loan amount to the borrower in one go. The name is suggestive enough and full disbursement means that the entire loan amount is given to the borrower in a single instalment.
Partial Disbursement
In some cases, the entire loan amount is not disbursed in one go. Here comes the concept of partial disbursement which is applicable in cases like the purchase of an apartment which is under construction. Here the borrower cannot expect the lender to pay the amount in one go. The loan disbursement thus comes in stages. On average, around 20 percent is released when the foundation of the apartment is completed; 15-20 percent is released when walls have been raised. In a nutshell, the progression of the loan amount is dependent upon the stage of the apartment under construction.
Advance Disbursement
At times, the lender is also willing to give the entire loan amount as an advance. This happens when the borrower has a good reputation. In cases when a builder has a good reputation of repaying loans, the banks are willing to shell out the entire loan amount in advance, even before the construction of the apartments have been initiated. The past credit score of the borrower is an indicator in this kind of disbursement and such loans fall under the category of advance disbursement.
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