Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Personal Use Loan > What Is A Personal Loan Sanction Letter_ Why Is It Important

Personal Use Loan

What Is A Personal Loan Sanction Letter_ Why Is It Important

What Is A Personal Loan Sanction Letter_ Why Is It Important

Your financial needs do not always materialize as planned, and you might run out of money when you least expect it. In the past, such circumstances required the borrower to visit the moneylender, but now personal loans can cover all your financial needs. Whether you need funds to travel or arrange cash for a medical emergency, you can obtain a personal loan instantly.

Although, personal loans from banks are subject to critical steps of customer verification that determine the result of your loan application. One essential document that will move you one step closer to obtaining a personal loan is a personal loan letter, also known as a personal loan sanction letter, which is a green light confirming your loan approval.

Through this article, you will better understand the whole process of personal loan sanction, its letter format, and what a sanction letter is.

What is a sanction letter?

Once the lender has reviewed your application and determined you are qualified for a personal loan, lenders will provide a sanction letter for the personal loan. The document includes all the details about a personal loan and the conditions for its approval. This is what a sanction letter is.

What is a personal loan sanction letter?

A personal loan sanction letter indicates that your personal loan request has been approved. The details provided in a letter of loan sanctionare the total loan amount, interest rate, and monthly payment amount.

It is necessary to submit additional documents and sign the loan agreement before the loan amount is released. A lender will only agree to transfer the loan amount to the borrower’s account following a successful document verification.

It would be best if you remembered to submit all these documents before the sanction letter’s validity expires.

Details Lenders Look for While Approving or Rejecting a Personal Loan Letter

  • Your credit score – the higher your credit score, the higher the chances of your sanction getting approval.
  • Your credit history – at it’s an unsecured loan, lenders check to ensure that the applicant has a clean loan repayment record.
  • Your income and employment status – to ensure that the applicant has a stable source of income.
  • Your KYC details – to ensure that the documents submitted are genuine.

If you work for a delisted company, have a bad credit history and score, don’t have a reliable source of income, have applied for multiple loans at once, or have a debt-to-income ratio of more than 40%, your loan application may be denied.

Importance of Sanction Letter for a Personal Loan

Important loan repayment terms, such as processing fees and late payment penalties, are included in a sanction letter. A lender’s approval letter is required to obtain a loan, enabling the application of loan sanction to be processed further. You can choose to proceed based on the conditions outlined in the sanction letter.

You can use a personal loan letter to determine whether you want to proceed or change your mind based on your financial circumstances. Additionally, the letter serves as evidence if a legal dispute arises between the borrower and lender in the future regarding a breach of the loan agreement.

Personal Loan Sanction Letter Format: Key Components

To make sure you comprehend all the details in this document clearly, you must be familiar with the personal loan sanction letter format. The personal loan sanction letter format may differ from lender to lender, but some details remain constant. A letter of loan sanction can contain the following information:

  • Sanctioned loan amount
  • Interest rate (fixed, hybrid, or variable)
  • The applicable rate of interest
  • Loan tenure
  • Applicable EMI
  • Processing fee
  • Last income tax return form
  • Validity of the sanction letter
  • Terms and conditions

A sanction letter typically has a six-month validity period. When you fail to use it within the allotted time, your application for loan sanction is revoked, and you must reapply for the loan to prove your eligibility again.

Documents Required to Receive Your Personal Loan Sanction Letter

  • A copy of your Voter ID / Passport / Driving License / Aadhaar Card
  • A copy of your Bank statements for the last six months
  • A copy of your Salary Slips for the last three months
  • A copy of your Ration Card / Electricity Bill / Passport
  • A certificate stating one year of continuous employment

Additional criteria for salaried employees while filing an application for loan sanction is

  • Must earn at least Rs. 15,000 per month and
  • At least a year of professional experience.

How is a Sanction Letter Different from a Disbursement Letter?

A sanction letter guarantees that the loan has been approved, whereas a loan disbursement is when the loan amount arrives from a bank account following valid verifications.

Even if your financial institution approves the loan, you must still go through additional formalities before receiving the disbursal loan amount. Usually, the money is paid out after receiving the sanction letter, which can take anywhere from 24 hours to two working days. However, the time it takes for a personal loan to disburse can differ from one lender to another.

In most cases, the lender will mail you the check, or you can request a draft for the loan amount. However, many lenders now offer direct bank transfers using NEFT to transfer the money directly to your account.

Validity of a Personal Loan Sanction Letter

A sanction letter is the conditional approval document issued by the lender after a successful application for a personal loan. Borrowers often wonder about personal loan sanction letter validity during their application.

Typically, this letter will remain valid for a limited period, often 15 to 30 days, depending on the lender’s policies. If you fail to complete the formalities and sign the agreement within this timeframe, the offer may lapse or the lender could revise terms. 

Check with your lender how long is sanction letter valid to avoid losing your approved loan amount. Always check the exact expiry date mentioned in your letter, and ensure all remaining documentation is submitted in time. 

Accepting or Rejecting Your Personal Loan Sanction Offer

Once a lender issues a sanction letter, you have the choice to accept the sanction letter or decline it based on the loan terms offered. The letter outlines the approved amount, interest rate, tenure, and charges, but it is not a binding agreement. Many borrowers wonder, can I reject personal loan after sanction letter? Yes, you can. If the terms do not suit your needs, or if you change your mind, you are free to decline the offer without any penalty, provided you have not signed the final loan agreement or authorised disbursal.

Before you accept the sanction letter, review the interest rate, EMI amount, pre-payment rules, and any additional fees. If everything aligns with your expectations, accept it within the validity period to proceed to disbursal. 

What to Do After Receiving Your Sanction Letter

Target Keywords: next steps after sanction letter, after personal loan sanction letter.

Follow these steps to prevent delays or the expiry of your offer after personal loan sanction letter.

  1. Review the details: The first of the next steps after the sanction letter is to read the document for key details like the approved loan amount, interest rate, tenure, and charges carefully.
  2. Submit required documents: After personal loan sanction letter, upload or submit ID proof, address proof, income documents, and bank statements as requested.
  3. Complete verification: The lender will verify all documents and check whether you meet any remaining conditions mentioned in the sanction letter.
  4. Sign the loan agreement: Once verification is complete, sign the final loan agreement to accept the terms formally.
  5. Await disbursal: After signing, the lender processes the disbursal to your bank account, completing the loan procedure.

Final thoughts

Before borrowing a loan, it’s crucial to understand every aspect of it. Educating yourself on the basics and essentials of a sanction letter will give you a better understanding of how it works. When you receive the sanction letter, be sure to read the terms and conditions thoroughly and make the best decision from there.

The application process for personal loans has become easier with Tata Capital.  With Tata Capital, you can find personal loans tailored to your needs, whether you are planning a world tour or need to extend your home. Although, to apply for a loan and repay it on time, you must provide proof of income and employment, along with adequate identification.

You can apply for personal loans in person or through a single touch from the convenience of your home. With us, you can apply for multipurpose personal loans with competitive interest rates for a convenient tenure of up to 6-years.Head to our website to check your personal loan eligibility and apply!

Apply For A Personal Loan

Get an Instant Personal Loan for all your needs !

Apply now
Popular Searches
Term Loan Personal Loan for Government Employee Personal Loan for Salaried What is Personal Loan Personal Loan Prepayment Personal Loan Application Process 3 Lakh Personal Loan 4 Lakh Personal Loan 6 Lakh Personal Loan 7 Lakh Personal Loan 8 Lakh Personal Loan 9 Lakh Personal Loan
More About Loans
Instant Personal Loan personal loan emi calculator personal loan interest rate personal loan eligibility Marriage Loan Document Required for Personal Loan Home Renovation Loan Medical Loan Personal Loan Balance Transfer 5 Lakh Personal Loan Small Personal Loan Travel Loan Personal Loan for Women 2 Lakh Personal Loan 10 Lakh Personal Loan

FAQs

What is a Personal Loan Sanction Letter?

A personal loan sanction letter is a formal approval document issued by the lender confirming the loan amount, interest rate, tenure, and key terms. It’s essentially the lender’s “yes,” provided you complete the remaining formalities.

Why is a sanction letter important for personal loans?

A sanction letter for personal loan outlines all approved terms upfront. It helps borrowers understand the exact offer, compare lenders, and proceed confidently before signing the final agreement.

What details are included in a typical personal loan sanction letter format?

A standard personal loan sanction letter format includes the approved loan amount, interest rate, tenure, EMI, charges, validity period, and required documents. It also lists the conditions to be fulfilled before disbursal.

How long is a personal loan sanction letter valid?

The loan letter is usually valid for 15–30 days, depending on the lender. If you don’t complete the formalities within this period, the offer may lapse or be revised.

Can I reject a personal loan after receiving the sanction letter?

Yes, a sanction letter is not binding on the applicant. You can reject the loan if you haven’t signed the final agreement or accepted disbursal.

What is the difference between a sanction letter and a disbursement letter?

A personal loan sanction letter shows approved terms, while a disbursement letter confirms that the loan amount has been released to your bank account after all formalities are completed.

Can the loan amount be changed after a sanction letter is issued?

Can the loan amount be changed after a sanction letter is issued?

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download