Difference Between Loan Sanction Letter and Loan Disbursement Letter

Difference Between Loan Sanction Letter and Loan Disbursement Letter

When you apply to a foreign university and seek an education loan a lot of documents are required. All demand an education loan sanction letter and some demand a disbursement letter. A loan sanction letter is a document confirming your eligibility to get a loan on certain terms and conditions. The university will accept the letter at the initial stage as evidence of financial support. After getting the confirmation letter of admission the bank issues the disbursement letter and then transfers the fees amount to the university. Let’s understand in detail the basic difference between loan sanction and loan disbursement letters.

Also Read: What is a Loan Capability Certificate

Loan Sanction Letter and Its Significance

A loan sanction letter is a formal document issued by the bank when your loan has been approved. After the bank receives your application it starts verifying important details like credit history, income proof, PAN card etc. After the verification the final amount is decided by the bank and the bank issues a Loan sanction letter. All details about the loan like loan amount, EMI, rate of interest, duration etc. are mentioned in the sanction letter.

  • You are required to submit your loan sanction letter (duly signed by the issuing authority with a stamp) to your university if they ask for it. In most of the cases, the university asks for a sanction letter prior to the confirmation of admission.
  • If you got the desired amount as a loan from the bank and you are comfortable with all the terms and conditions of the loan then you are ready to move ahead with the process.
  • However, in case you don’t like any particular thing you can decide whether or not to proceed with the loan from the same bank. 

Also Read: Benefits of Early Repayment of Education Loan

What is a Loan Disbursement Letter?

Universities, when the bank issues the sanction letter and you decide to proceed with the loan then start the loan disbursement process. A loan disbursement letter is another formal document issued by your lender. The letter is then required to be submitted to the university as evidence of financial support. After getting the loan disbursement letter you need to move ahead with initiating the disbursement process. Check the detailed process below:

  • The bank will transfer the amount of the fee to the university’s account directly. However, it will not be done at once but in installments which will be decided as per the course structure.
  • If you are getting accommodation outside the university then the bank will transfer the allocated amount to your bank account directly.
  • For the upcoming instalments, the university will remind you and you need to convey the same to your bank so that fees continue to be paid on time. 

Key Differences Between Loan Sanction Letter and Disbursement Letter

The loan sanction letter and the disbursement letter both act as evidence of financial support. You need to submit both letters as per the directions of the university. Check out some major differences between the letters:

Loan Sanction LetterLoan Disbursement Letter
This is the initial document provided by the bank assuring your eligibility to get an education loanA disbursement letter is issued when you finalise the bank to act as your lender. After getting the letter you are supposed to ask the bank to initiate the disbursement process.
You can change your university or your lender even after getting the loan sanction letter. This is because now you are knowing that you are eligible for a certain amount of loan It is generally not advised to initiate any changes in your university as the bank is ready to transfer the loan amount to the respective accounts.
Even after getting the sanction letter, there might be chances of the loan getting rejected due to appropriate reasons.Rejection generally doesn’t happen after the issuance of a loan disbursement letter. 


Can I change my university after getting the sanction letter?

If you decide to change the university after getting the loan sanction letter you can do it easily. The bank will restart the entire process of the education loan in this case. However, banks may demand some amount as a processing fee. 

Can I change my bank after getting the sanction letter?

If you are not satisfied with the terms and conditions or the bank has not approved the exact amount that you demanded then you can choose not to move forward with the same bank. You can definitely approach other banks or financial institutions.

Is it possible that the loan will be rejected after the bank has issued a loan sanction letter?

Under some valid circumstances, the bank may choose not to approve your loan. It is advised to the students that provide all required documents and not hide any information.

A loan sanction letter and loan disbursement letter are important documents which you will require if you are taking an education loan to study abroad. The university will ask for these documents to check your financial status or support. You must ensure that all these documents are appropriate and in a proper format as directed by the university. 

To know more about loan sanction and disbursement letters, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience. Follow our social media handles on Twitter, LinkedIn and Instagram

About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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