Is cash disbursement allowed in used car loans?

Most lenders don’t allow cash disbursement for used car loans. The money is normally sent straight to the seller — either a dealership or a private owner. It keeps the paperwork clean and helps the lender track where the funds went, which matters during registration and hypothecation.

This is how the process usually goes. Once your loan is approved, the lender asks for the seller’s bank details. Dealers usually share this quickly; with private sellers, you may need to double-check the account number yourself before passing it on.

During disbursement, the lender transfers the exact amount to the seller’s account. You’ll usually get an SMS or email on the same, and many people save it just to keep a record. In cases where the seller still has an old loan to clear, the lender may send part of the amount to the previous bank first.

What usually slows things down is some small mismatch in the papers — the seller’s name appearing slightly differently on the bank account, an older RC copy that doesn’t show the latest update, or a past loan on the car that no one mentioned upfront. When something doesn’t add up, the lender simply holds the transfer until the details are corrected.

And if you face any issues at any point, a quick call to the lender or dropping by the branch for five minutes generally clears the doubts. It’s usually just a matter of aligning one or two documents.