Applied for a personal loan, but how do you know that the application has been approved? It is the personal loan sanction letter that approves your application and ensures loan disbursal.
Let us delve deeper and discuss everything you need to know about the sanction letter.
What is Personal Loan Sanction Letter?
A personal loan sanction letter is issued from a bank or NBFC to the customer for the loan application.The letter confirms the applicant’s eligibility to take a certain amount of the personal loan. It is the initial step toward loan disbursement. You need to furnish documents as per the set guidelines of the lender. A personal loan is a collateral-free loan, and lenders thoroughly verify your loan repayment capacity and intent. Lenders need to ensure that everything is in order. Therefore, they issue a personal loan sanction letter before issuing the final loan agreement.
Why is it important?
A sanction letter is an essential step to avail of a personal loan. After receiving the letter, applicants must submit the required documents for personal loan processing.
The letter shows your eligibility for the loan. It means the sanction letter validates your application.
The personal loan sanction letter contains interest rate, approved loan amount, loan repayment tenure, EMIs, and processing fees (if any). It gives a complete picture of the lifetime cost of the personal loan and your eligible loan amount.
With this information, you can negotiate with other lenders and get the best deal.
How does a lender issue a personal loan sanction letter?
The lender checks personal loan applications and considers the following aspects after receiving the application before issuing a sanction letter.
Credit history and credit score: desirable credit score is above 750 for a loan eligibility
Loan repayment capacity
Debt to income ratio: percentage of debt in comparison with your income
Employment status or income sources from trade or business
Existing debts, outstanding loans, and other liabilities
Documents verifications to check their authenticity
If the lender is satisfied with all the information, they will issue a sanction letter.
Sanction and disbursal time from leading lenders in India
Lender Name Sanction and Disbursal Time
HDFC Bank – Four hours to three or four working days
Bajaj Finserv – Instant sanction and disbursal in twenty-four hours
Tata Capital – Instant sanction for online and few working days for offline applications
Yes Bank – Approval and sanction within five working days
ICICI Bank – Few minutes to three or four business days
IndusInd Bank – Sanction and disbursal within four to seven working days
Fullerton India – Instant sanction and disbursal in thirty minutes
The validity of the Personal Loan Sanction Letter
Usually, the personal loan sanction letter provides six months of validity. Applicants must complete the process and avail of the loan within the said timeline. The sanction letter gets lapsed after six months period.
The sanction letter is not a legal approval of the loan. You must submit the required documents to proceed with the loan disbursal process. Consult your bank for a specific list of documents. It might differ from lender to lender.
Generic List of Documents for Sanction Letter
Duly filled and signed personal loan application form
Documents for address proof like Aadhar Car, Electricity Bills, Voter ID, etc
Letters and track record of outstanding loans (if you have any active debt and loan)
KYC documents like photocopies of the passport, driving license, Voter ID, etc.
Latest salary slips or bank statement
Form 16 and Income Tax Returns
Three to Six month’s bank statements with a steady source of income
Again, the list is generic. It might differ according to the lender’s internal terms and policies.
A personal loan sanction letter is an essential document for loan disbursal, but it is not the final approval letter. It does not carry legal sanctity. It means your application is qualified for the loan, and you must submit documents to proceed with the loan disbursal procedure. Personal loan applicants must read the sanction letter carefully and understand loan details. You can also consult the loan manager or executive to clarify the content of the sanction letter. After complete understanding, sign the document and submit it for the further process. A sanction letter is a crucial document for personal loan procedure. You must keep it securely until the loan amount gets disbursed and for future reference. It could also help to avail lower interest rates and better deals from other lenders.