Loan Sanction Letter v/s Disbursement of Loan - Meaning & Difference
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About Loan Sanction Letter & Loan Disbursement Process

Whether you're in the process of applying for a home loan or eagerly anticipating its approval, the ultimate milestone you're waiting for is the "Loan Sanction." Essentially, this term signifies the green light for your loan application. Once your application is approved, you'll receive a Loan Sanction Letter, confirming this pivotal step. The subsequent phase is the "Loan Disbursement," wherein the funds that have been sanctioned are released, allowing you to proceed with your home purchase. This stage marks the actual realisation of your homeownership dream, as the sanctioned funds are now ready for you to use towards securing your new home.

What is a Loan Sanction Letter?

Upon approval of your home loan application, your bank will provide a Loan Sanction Letter as confirmation. This letter is issued after a thorough assessment and verification of details like your address, income, credit history, assets, and more. The loan sanction letter typically contains essential information, including the sanctioned loan amount, loan tenure, interest rate, EMI, and other pertinent details. You can get an in-principle sanction letter from Kotak Mahindra Bank in less than 10 minutes of loan approval.

What is Loan Disbursement?

Loan disbursement is the moment when the bank delivers the sanctioned amount to the intended account. This process, known as loan disbursement, is remarkably swift. Typically, it takes a few days after receiving the Loan Sanction Letter. It's essential to note that in the context of new property purchases, the funds are transferred to the builder, and for resale properties, they are directed to the seller, not the borrower directly.

What Is Home Loan Sanction Letter? What Is The Process Of Home Loan Sanction?

Home Loan Sanction Letter is a crucial document in the home loan approval process. Once your loan application is reviewed and approved by the bank, a Home Loan Sanction Letter is issued. This letter serves as official confirmation that your loan has been sanctioned and outlines key details, including the sanctioned loan amount, interest rate, tenure, and terms.

The Home Loan Sanction Process involves several steps. First, you submit your loan application along with the necessary documents. It is then evaluated against your eligibility and creditworthiness. Upon approval, you are issued the Sanction Letter. Then, the Home Loan Disbursement Process begins, where the sanctioned funds are released to purchase your home. This marks the transition from loan approval to actual utilisation.

Key Documents Required for the Home loan Sanction letter

To ensure a smooth Home Loan Disbursement Process and obtain your Loan Sanction Letter, you'll need the following key documents:

  • Application Form with Photograph: Duly filled and signed.
  • Identity, Residence, and Age Proof: Documents verifying your identity, residence, and age.
  • Last 6 Months Bank Statements: Showing your financial transactions.
  • Last 3 Months Salary-Slips: Providing income proof.
  • Processing Fee Cheque: To cover associated costs.
  • Form 16/Income Tax Returns: For tax-related verification.
  • Proof of Business Existence: If self-employed, establish your business presence.
  • Business Profile: Offering insights into your business.
  • Education Qualification Certificate: Demonstrating your qualifications.
  • Last 3 Years Income Tax Returns: Including computation of income.
  • Last 3 Years CA Certified/Audited Balance Sheet and Profit & Loss Account: Reflecting your financial stability.


These documents are crucial for both the loan sanction and the subsequent home loan disbursement meaning the release of sanctioned funds for your home purchase.

Loan Sanction Letter Key Elements & Its Format

When you receive a Home Loan Sanction Letter, it's essential to understand its contents and format. Here's what you can typically expect to find in this crucial document:

  • Applicant Information: The letter begins with details about you, the borrower, including your name and contact information.
  • Loan Details: It provides specifics about the sanctioned loan, such as the loan amount, interest rate and the interest rate type, and tenure.
  • Loan Terms: This section outlines the terms and conditions of the loan, including repayment schedules, EMI amounts, processing fees, additional charges or any other special clauses.
  • Validity: The letter specifies the period of validity during which you must accept the sanction and proceed with the loan.
  • Conditions: It may include conditions that must be met before disbursal, like property-related documents and insurance requirements.
  • Property Details: Particulars regarding the property for which the loan has been sanctioned, including the property's address and its estimated value.


A well-structured home loan sanction letter ensures clarity and transparency in the loan process, making it a crucial document for borrowers.

As we see the world grow, we see there’s nothing permanent. Demands change, people evolve, and lifestyle varies on a day to day basis. But, generally, what stays constant is people’s need to have a home of their own. And this emotion should be supported with the right Home Loan. Before the search for the right loan begins, there are a few key points a home buyer needs to be aware of.

  • Check Home Loan Interest Rate: It helps while repaying the home loan without disturbing the monthly budget. You can also calculate your home loan installments using a home loan EMI calculator
  • Housing Loan Eligibility: With Housing Loan Eligibility Calculator, home-buyers can get an idea about the optimum loan amount they can afford, without facing financial difficulties. And most importantly, it helps in planning the budget effectively for their dream home.
  • Loan sanction meaning: To verify all your details everything from the existing residential address to the CIBIL score, complete information is thoroughly checked. Once the bank has validated all the details, and your loan is approved, you will receive a home loan sanction letter that states your loan has been approved. A home loan sanction letter is valid for 6 months.
  • Loan disbursement meaning: Loan disbursement refers to the actual release of the approved loan amount. This step is pivotal in facilitating the purchase of the property, ensuring that the funds are available for the borrower's use, thus advancing their progress towards residential ownership.


People often get confused between home loan sanction and disbursement. There’s a vast difference between the two. A bank loan sanction letter is only the approval of the loan. It does not mean the home loan amount will get disbursed without any further checks. A loan disbursement is the actual delivery of the amount from a bank account post property related verification & post any other required validations.

What is the Importance of a Sanction Letter in Bank Loan Process?

When you're on the path to acquiring a home loan, a Sanction Letter holds immense significance. It's more than just a piece of paper; it's your ticket to a successful and well-informed financial journey. Here's why:

  • Credible Confirmation: A sanction letter is an official document from the bank confirming the approval of your loan application.
  • Clear Loan Terms: It outlines the terms and conditions of the sanctioned loan, including interest rates, tenure, and EMI details.
  • Negotiation Power: Armed with a sanction letter, you have a stronger position while negotiating property deals, as it signifies your financial credibility.
  • Avoidance of Disputes: It serves as a reference point, preventing any potential disputes between you and the bank regarding the approved loan amount.
  • Focused Property Search: With a clear understanding of the sanctioned amount, you can streamline your property search to options within your budget.
  • Time Efficiency: It expedites the subsequent steps in the home-buying process, such as legal formalities and home loan disbursement.

Here Are The Different Types Of Disbursement Of Loan:-

  • Full loan Disbursement Meaning

When the loan disbursement process is completed in one instalment, it is full loan disbursement. The bank hands over what is disbursed amount at one time. If the homebuyer is purchasing a home from a builder, then the cheque will begin in the builder's name.

  • Partial loan Disbursement Meaning

When the loan disbursement process takes place in stages, it is partial disbursement. While purchasing an under-construction apartment, the amount will be released in stages on the basis of where the construction has reached.

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Sanction Vs Disbursement FAQS

1.) What is Loan Disbursement Meaning?

Loan disbursement is when the bank delivers the amount of loan to the borrower. It must not be confused with a bank loan sanction letter. A loan sanction guarantees your loan has been approved.

2.) What is Disbursed Amount?

The disbursed amount is the amount released from your creditor post loan approval. The loan disbursement process ends when the full amount is received.

3.) What is loan disbursement letter?

A loan disbursement letter is an official document issued by the bank to a borrower. It confirms the release of the approved loan amount, providing essential details such as the disbursed sum, repayment terms, and any relevant conditions, ensuring transparency in the lending process.

4.) What happens after the loan sanction letter?

The procedure after a home loan sanction is straightforward. The original property documents are handed over to the bank and are retained by the bank till the amount is repaid by the borrower. The procedure after home loan sanction involves the handing over of documents and disbursement of loan to the borrower.

5.) Can a loan be rejected after the sanction letter?

You now know what a loan sanction letter is- the loan approval, but it is possible to get your home loan application rejected even after you receive this letter. Any time between loan sanction and disbursement, your application can be rejected if there is any job instability or a drop in your credit score, or other glaring concerns.

6.) How long does a loan disbursement take?

The time between loan sanction and disbursement is not too long. After you get the bank's approval through a sanction letter, your loan amount will be credited through NEFT within 24 hours to a week.

7.) What happens after loan disbursement?

Home loan disbursement after registration means you will get the amount in your bank account. Post this, you will receive an email or SMS from your bank confirming the disbursal of your loan amount. The bank will also send you a confirmation letter in the welcome kit, EMI calendar, and amortisation table to calculate the principal-to-interest ratio.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.