How do you know your lender has approved your personal loan application? It’s the issuance of a sanction letter by the lender that is issued upon meeting all the eligibility criteria and submitting all the related documents.
A sanction letter is one of the most important documents in any loan approval process. It includes all the details of the personal loan and the terms on which the loan is sanctioned. Issuance of the sanction letter is the first step toward disbursal of the personal loan amount to the borrower’s bank account.
A personal loan sanction letter acts as a letter of approval by the lender to the person who has applied for the loan. Through this letter, the applicant is informed of the loan amount approved, loan tenor, personal loan interest rate, processing fee, and EMI amount.
A sanction letter is not the final loan agreement document. The borrower has to provide all the relevant documents to the lender and upon successful verification and loan agreement execution, the lender agrees to advance the loan process and disburse the loan amount.
Upon receiving the personal loan application, the lender conducts the following checks on the borrower profile to issue a sanction letter:
If the lender is satisfied with the above information provided, the borrower is issued the sanction letter. To increase the chances of getting a personal loan sanction letter, use the personal loan eligibility checker to know your eligibility for availing of the personal loan. Based on the results, you can work on the factors to improve your personal loan eligibility.
Also, you can use the personal loan calculator, which helps you to calculate the EMI for different loan tenures. Always go for EMI that can be easily afforded by you without impacting your finances. You can repay the personal loan amount in a tenure ranging between 12 to 60 months.
The following are the importance of a personal loan sanction letter:
The format of the personal loan sanction letter differs for each lender, but the details included in it remain the same. A sanction letter will include:
The lender will also include the terms and conditions for availing of the personal loan. For example, the validity of the sanction letter, situations under which the sanction letter can be revoked, and the details for the processing of the loan application.
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Generally, the validity of the sanction letter is six months. The borrower has to avail of the loan facility within that period. In case, the term of the sanction letter expires or is revoked, the borrower has to make a fresh loan application and fulfill all the personal loan requirements demanded by the lender.
The following are the personal loan documents required to issue a sanction letter:
For self-employed professionals, they need to provide documents related to proof of their business, business financials of the last two years audited by a CA, and income tax returns for the last two years.
A sanction letter is an important piece of document, but not the final letter of approval and doesn’t legally approve the loan. You need to undergo additional levels of verification and other background checks before the final loan agreement is drafted.
Once you receive the sanction letter, go through the details of the letter including terms and conditions and take steps as required for the next stage of approval.
If there is an error in the sanction letter, you should bring it to the notice of your lender immediately before the next stage of approval begins.