Ahost of projects and willing lenders have made the dream of owning a house a reality for many. Apartments are equipped with unimaginable amenities and luxuries. Banks vie with one another to entice more borrowers and meet targets. The much-awaited moment that both the borrower and builder look forward to is - disbursement. But did you know that disbursement comes in different variants? Let's explore.

A home loan process is a lengthy one that starts off with filling up an application form. After a credit appraisal, scrutiny of your papers, legal formalities, technical check, valuation and collecting fees and margin money, the lender finally disburses the loan. Disbursement is payment of the loan amount by the lender to the borrower to meet his expenses.

Consider the case where the lender decides to disburse the entire amount as in the case of a fully constructed house, with no major work pending. This is called full disbursement. A loan is fully disbursed by the lender only when the builder is a reputed and respected one. Only in rare situations, will a lender fully disburse the loan amount, for a project that is in its initial stages. Otherwise, only for a ready-to-occupy house, the bank disburses the entire loan amount.

Loan disbursement largely depends on the phase of completion of a project. Be it a small house or a large apartment complex, the stages of construction are similar. After planning, drawings and approval, work on the ground commences with laying foundation walls. Then walls are raised. Roofing, plastering, woodwork, painting, electrical and plumbing jobs ensue. When a bank chooses to release the loan in various stages, it is referred to as partial disbursement. Depending on the pace and the level of progress made in the construction, money is disbursed by the lender.

For instance, when the foundation work is complete, the bank may choose to disburse 15 percent of the loan amount. The next release of say 20 percent may happen when the walls are erected. Banks make a partial disbursement for most borrowers who want to buy a house that is yet to be constructed or is under construction.

Advance disbursement is when the lender agrees to release the full amount for a house that is still under construction. This happens if the builder is a reputed one or the lender is convinced that the developer will complete the project on time. The lender can also make an advance disbursement when the borrower requests for it.

How do these variants impact the borrower? Would partial, full or advance disbursement make a difference to the borrower?

There is a larger element of risk involved in case of advance disbursements. The borrower is tied down financially to an asset that does not exist. It is very important for the borrower to read the agreement word by word before signing the deal. Most clauses are heavily tilted towards the lender. This leaves the borrower exposed to consume all sorts of risks. Starting from interest rate hikes to almost every risk is passed on to the borrower. This calls for adequate caution on the part of the borrower now rather than repenting later.

In case of partial disbursement, pre-EMI is a lower burden since it is computed on the amount disbursed at each stage rather than the full loan amount. In case of advance disbursements the EMI clock starts ticking for the entire loan amount, even before the construction is complete.