Sanction Letter: What is a Sanction letter? A sanction letter (or a Home loan Sanction letter) is often used in the context of banking and loans. This is a formal letter issued by a bank to an individual who has applied for a home loan and is eligible to avail a certain portion of that loan. This letter is also used by financial institutions for the same purpose as well. However, the letter is only granted if the applicant fulfills certain criteria set by the bank or the financial institution.
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Who Gives a Sanction letter?
As stated above, sanction letters are provided by the bank or a financial institution to an applicant after they are found to be eligible for receiving a portion of the loan. To ensure eligibility, the bank or financial institution will often require the applicant to submit certain documents to check the credit history of the applicant. This is done in order for the bank or the financial institution to verify whether the applicant is capable of repaying the loan amount.
Sanction letter – List of Documents Often Required for Application Process
If the applicant has applied for a loan, they will be required to provide all or at least most of the documents mentioned below:
- ID Proofs such as PAN card, Aadhar card or passport
- A passport-sized photograph of the applicant
- Proof of residence – such as electricity bill/ landline bill or rental agreement
- Salary slips (Duration may vary according to banks)
- Latest bank statements (Usually of 6 months or more)
- If you have any existing loan, you might be asked to provide a loan outstanding letter
- Qualifications of the applicant
- Site/ flat booking allotment number
After submission of the above mentioned documents, the bank officials will validate the details and provide their insights to the bank. If the applicant’s credit history is good, the chances are high for the loan application to be accepted. Moreover, refrain from providing incorrect details as this can be detrimental to your application process. If the bank or the financial institution finds that your application is eligible, they will issue an acceptance cum offer letter that favours the loan applicant.
Sanction Letter Contents
A typical sanction letter issued by a bank has the following components:
- The total loan amount sanctioned
- The repayment tenure for the loan
- Applicable interest rates for the loan
- The interest’s base rate
- EMI details
- Pre-EMI details (if applicable)
- The validity of the sanction letter (usually about 6 months or less)
- Additional terms and conditions of the lending institute
FAQ’s on Sanction Letter
Question 1.
What is a Sanction letter?
Answer:
A sanction letter is a formal letter issued by a bank to a loan applicant when they are deemed eligible to avail loan. This letter is also used by financial institutions for the same purpose.
Question 2.
Who provides a Sanction letter?
Answer:
Sanction letters are provided by banks and financial institutions to an individual who has applied for a loan.
Question 3.
What are the contents of a sanction letter?
Answer:
A sanction letter contains the following details: The total amount of loan sanctioned; the repayment tenure for the loan amount; the applicable interest rates for the loan; the interest’s base rate; EMI details and pre-EMI details (if applicable); the sanction letter’s validity; additional terms and conditions of the lending institute.