A person needs a personal loan. He applies in a bank and gets a loan approval letter at a high interest rate. So he goes to another bank with approval letter for a lower interest rate. Now you may be wondering what is this approval letter? In simple language, it is called a sanction letter.
What are the important features of a sanction letter:
– The bank or lender issues a letter of approval (approval letter) to a person who has applied for a loan.
– Through this letter, the applicant is given the right that he is entitled to a certain amount from the bank after fulfilling certain terms and conditions written in the sanction letter.
– The loan is usually a sufficient amount, a lender needs to ensure that everything is in order. Before giving the final loan agreement, the lender issues a letter of approval, stating that an applicant has been sanctioned a loan.
– Sentence letter is not issued immediately. The first applicant gives his documents. After this, the lender verifies the documents. When the lender agrees, he advances the loan process.
Some important things, which the lender considers before issuing the sanction letter:
• Applicant’s credit history
• Applicant’s ability to repay debt
• Applicant’s current income
• Whether the given documents are genuine or not
• Applicant’s source of income
• Outstanding debt, if any.
Importance of sanction letter
• The letter of acceptance is a letter of approval, which has a validity.
• To get a loan, it is necessary to get a sanction letter.
• The sanction letter can be used to negotiate a lower interest rate.
• It is also an important factor in loan processing.
What happens in sanction letter
The format of a loan sanction letter may vary from lender to lender. Therefore, it is important to talk to the Customer Relationship Officer before signing loan documents. The general details given in the sanction letter are as follows:
– Sanction Loan Amount
– Loan repayment period
– What kind of interest will be charged on the loan amount – Fixed, floating or hybrid.
– Real interest rate applicable at the time of loan disbursement.
– The base rate at which the interest is calculated.
– Applicable EMI and Pre-EMI amount.
– Validity period of sanction letter.
– The terms or conditions the lender wants to put in the loan agreement.
Validity of sanction letter
An applicant should be aware that there is no legal approval for a sanction letter. They have to submit several documents and sign loan documents before disbursing the loan. Normally, the validity of the sanction letter is 6 months and if the loan is not taken during this period, the selection letter will be useless.
Documents required for sanction letter
Every lender demands various documents while issuing a sanction letter. But the list of documents for personal loans varies from lender to lender. These are the documents you may need to submit:
– Well filled personal loan application form
– address proof
– Loan outstanding letter with track record
– Bank statement for the last three months (6-month passbook)
– Form 16
– Latest salary slips
– Basic KYC documents like passport copy, voter id card, driving license, aadhar card
– Current date salary certificate
– Income Tax Returns
Keep in mind that getting a letter of acceptance does not mean the approval of the loan amount. Before disbursing the loan amount, the applicant has to submit some documents and sign the loan agreement. The sanction letter is an important document in the process of personal loan, which you can also keep with you to show somewhere in the future. The Suction Letter is your hidden weapon to take a loan at a low interest rate.