Personal loans are a great way to arrange for urgent funds for emergencies. A personal loan sanction letter is a document provided by the lender to confirm the approval of the loan.
Want to know ‘what is sanction letter’? A personal loan sanction letter is not very different from a general loan sanction letter. It is a legal document that provides written confirmation that your loan has been approved and that it will be sanctioned soon.
It is proof that your lender is going to provide you the loan amount under the predecided terms and conditions. The lender verifies certain details about you before giving you a sanction letter. They are mentioned below -
Credit score
Credit history
Repayment capacity
Employment status
Income
Debt to income ratio
Documents submitted
The fact that all your documents have been verified and you will be given a loan is put in black and white on a personal loan sanction letter.
Now that you know ‘what is loan sanction letter’, let us look at what it contains. The contents of a loan sanction letter are described below -
The details of the lender and the borrower are mentioned on a loan sanction letter.
The loan application number along with the loan amount that has been sanctioned is clearly mentioned on a loan sanction letter. It might be different from the loan amount that you applied for. The amount mentioned on the sanction letter is what was approved for you based on your creditworthiness.
Whether it is a personal, business, home loan, or any other type of loan is an important fact. The category of loan you applied for is also written on the loan sanction letter.
The interest rate varies based on your creditworthiness, your loan amount, tenure, and many other factors. It plays a huge role in any loan as it determines the amount of EMI that needs to be paid every month.
The rate of interest is, thus, mentioned on a loan sanction letter.
Term loans are repaid through Equated Monthly Installments or EMIs. You need to pay a certain amount on a specific date each month for a predecided duration to clear the loan. This amount is also written on the loan sanction letter.
The loan tenure is the duration through which you need to pay the EMIs in order to clear the loan. It can vary depending on your loan and your specific profile. Whether short-term or long-term, you can find the the number of months or years on the loan sanction letter.
There are many types of charges associated with loans, such as processing fees, foreclosure charges, etc. These are all mentioned on a personal loan sanction letter.
If there are any insurance regulations or requirements with the loan that is being approved, that also needs to be noted down on the sanction letter.
A sanction letter is an important document when it comes to loans. Here are some of the benefits of a personal loan sanction letter -
Provides you protection that the loan has been sanctioned to you on the mentioned terms
Puts the transaction in black and white, thus, making it transparent between both the lender and the borrower
Since it is a legal document, it provides peace of mind that the lender will give the loan amount and the borrower will repay it as agreed
Yes, a personal loan can be canceled after it is sanctioned due to discrepancies.
You can reject a loan after receiving the sanction letter but the time frame is really short. If you want to cancel it, inform the bank or lender quickly.
The exact steps after loan sanction might vary depending on the lender. In most cases, you will receive a loan agreement letter which you have to sign and return after which your loan amount will be disbursed.
The loan offer letter informs the borrower about the terms and conditions offered by the lender. It means that the loan application can be initiated by the borrower. On the other hand, the sanction letter comes much later in the process and includes the loan amount, interest rate, etc. that will apply to the borrower.
In most cases, it is not possible to increase the loan amount after sanction. You can get in touch with your lender to know if it is allowed.
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