What Is A Personal loan Sanction Letter? Why Is It Important?

A sanction letter contains all the relevant information about the personal loan. Get to know the meaning & importance of personal loan sanction!

29 Nov,2022 09:58 IST 1492 Views
What Is A Personal loan Sanction Letter? Why Is It Important?

Personal loans are one of the most in-demand loan products to cover expenses when you don’t have enough capital. However, when you apply for such loans, the lender provides a document named a sanction letter, which is vital in the final approval of the loan.

What Is A Personal Loan Sanction Letter?

A personal loan sanction letter is an official document issued by the lender to the applicant of the personal loan stating the approval of the application submitted by the borrower. The sanction letter contains all the relevant information about the personal loan for the borrowers to review the terms. The lender provides the sanction letter after reviewing the following factors related to the borrowers:

• Credit Score:

A three-digit evaluation out of 900, the credit score reflects the creditworthiness of a person to the lender during loan applications. Lenders review the borrower's credit history to ensure that the credit score is above 750 out of 900.

• Employment Status:

Lenders require the borrower to be self-employed or salaried. If the borrower is a salaried employee, they must work in the current organisation for a minimum of six months.

• Income:

As the borrowers are legally liable to repay the loan personal loan amount with interest to the lender within the loan tenure, they must earn a minimum monthly salary. Generally, the minimum income required is Rs 22,000, but it can go higher depending on the city of residence.

• Outstanding Debt:

Lenders issue the sanction letter for a personal loan after reviewing the borrower's outstanding debt. The process includes understanding if the borrower earns enough to repay the loan amount with existing outstanding debt without default.

What Does The Sanction Letter Contain?

The idea behind issuing the personal loan sanction letter is to allow borrowers time to review the loan terms personally and ensure they will get the loan amount at desired terms. The sanction letter is applicable for six months, and some borrowers also use the sanction letter issued by a lender as leverage to get better loan terms from a different lender.

The sanction letter includes the following components.

• Loan Application Number:

When you apply for a personal loan, the lender generates a loan application number and sends it to your mobile number to reference your loan application. You can use the number to track the status of your loan application.

• Loan Category:

Since financial institutions provide various types of loans, such as home loans, business loans, personal loans, etc., they clarify the loan category in the sanction letter for better transparency.

• Sanctioned Amount:

The sanction letter also includes the loan amount the lender offers to the borrower. The loan amount may be lower or higher than the applied amount by the borrower, depending on other loan factors.

• Approved Loan Tenure:

The sanction letter includes the approved loan tenure depicting the period within which the borrower has to repay the principal amount with interest.
Zaroorat aapki. Personal Loan Humara
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• Interest Rate:

Every lender offers the loan by charging an interest rate over and above the principal loan amount. The sanction letter clarifies the base rate at which the lender calculates the interest rate, if it is fixed or variable, and the interest rate percentage.

• EMI Amount:

The sanction letter contains the calculated EMI amount that the borrower will have to repay after the disbursal of the loan. The monthly EMI amount includes a portion of the principal amount and the interest rate.

• Other Charges:

Personal loans include additional charges such as loan processing fees, foreclosure charges, etc. The sanction letter details all the costs the lender will levy on the borrower, with the situations that will make the borrowers liable to pay the charges.

Documents Required For Personal Loan Sanction Letter

Here are the documents required to avail of a personal loan sanction letter:

• Selfie:

The selfie of the applicant as photo proof.

• PAN Card:

The valid PAN Card of the applicant as ID proof.

• Aadhaar Card:

Applicant’s Aadhaar card or driving license for address proof.

• Employment Proof:

Employment proof for salaried employees/ Proof of business existence for self-employed individuals.

• Bank Statements:

Bank statements of the applicant for the last 6-12 months for creditworthiness.

• e-Sign:

e-Sign or e-Stamp for quick personal loan disbursal.

Avail of an Ideal Personal Loan With IIFL Finance

IIFL Finance provides comprehensive and customised personal loans to fulfil your capital requirement. You can receive instant funds up to Rs 5 lakh with a quick disbursal process after you approve the sanction letter that details all the factors for utmost transparency. Apply for the loan online or offline by visiting IIFL Finance nearest branch and verifying your KYC details.


Q.1: Does IIFL Finance issue a sanction letter before approving the personal loan?
Ans: Yes, IIFL Finance issues a detailed sanction letter to ensure you have all the details about the loan factors and the charges before you give the go-ahead for approval.

Q.2: Do I need collateral for a personal loan from IIFL Finance?
Ans: No, you do not need to pledge any asset as collateral to take a personal loan from IIFL Finance.

Q.3: How long can I take to approve the loan after receiving the sanction letter?
Ans: Generally, lenders allow six months to approve the personal loan sanction letter.

Zaroorat aapki. Personal Loan Humara
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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