What is a Personal Loan Sanction Letter? Why is it Important?

When you apply for a loan and receive a personal loan sanction letter, know that your lender has given a thumbs up to your application. But this document is a lot more than just an approval letter. It’s solid proof that you have borrowed money from a particular lender and contains important information that can come in handy at any point. This blog will highlight all the relevant information there is to know about a loan approval sanction letter format.

What Is A Personal Loan Sanction Letter?

When you complete your application for a loan, the lender assesses your overall credit profile including your credit score, repayment history, and monthly income, before giving you an offer. After which a personal loan sanction letter is sent to you which is written confirmation that you’re approved for a loan. It contains all the important details about the money you borrow including loan amount disbursed, interest rate charged, repayment tenure, etc. When you accept the sanction letter and the terms of use, it means you have agreed to the terms of borrowing. After which, you will receive the amount in your registered bank account.

What Does The Sanction Letter Contain?

All the terms of borrowing and important information related to the money you borrow are mentioned in your personal loan sanction letter. To sum it up, this is what you will find in a standard loan approval sanction letter format.

1) Approved Loan Amount

One of the most important information in this letter is the approved loan amount. This amount is calculated after the lender assesses your credit score, repayment history, monthly income, etc.

2) Interest Rate

When you borrow money from a lender, you have to pay it back with interest. This is the next thing you will find in the letter. The interest rate you’re charged on the loan is a sum of many factors like your credit score, risk appetite of a lender, monthly income, etc.

3) Repayment Tenure

Another important piece of information that you should look out for in the loan sanction letter is the repayment tenure.

Repayment tenure is the number of months or years in which you have to pay back the money you have borrowed.

Read Must: What is Personal Loan Repayment and Types of Loan Repayment Methods?

4) Insurance (If Any)

Many lenders offer personal loan insurance on the borrowed amount. If you have availed the same, you will find the charges applicable in the document.

Please note that the personal loan approval sanction letter format can look different for different lenders.

Importance Of Sanction Letter For A Personal Loan

A loan sanction letter is a lot more than a loan approval document.

Here are 4 reasons why you shouldn’t lose it even after you receive the loan amount.

1) Legal And Binding Document

A loan sanction letter is written confirmation that you are approved for a personal loan from a lender. This way, the lender is obliged to give you a personal loan.

2) Clarity On Loan Terms

It’s common to have doubts regarding the terms of borrowing from a lender. But the loan sanction letter can make it easier for you. Simply going through the document will give you complete clarity on everything – from taking the loan to repaying the money.

3) Basis For Financial Planning

Creating a sound budget before accepting the offer from the lender will ensure you pay all your loans on time. Go through the repayment tenure and the EMIs you have to pay, and then plan your budget to stay on top of your financial health.

4) Streamlined Loan Processing

When you accept the personal loan sanction letter, it’s a mutual agreement between the lender and the borrower that you have taken a personal loan. This makes the process from approval to disbursal quicker, helping you get instant access to the money you need.

If you don’t receive the document, you can request for the loan sanction letter from your lender.

How To Obtain A Personal Loan Sanction Letter?

You cannot obtain a personal loan sanction letter from a lender without getting approved for a loan with them.

However, the process for getting approval for a loan is simple. Just follow these steps:

Application Process

Choose a lender that fits your financial requirements and start your loan application process. And while it’s true that completing your loan application can take hours, on Zype it’s only a matter of 5 minutes.

Document Requirements

For you to be able to complete your application, you have to submit the required documents. And while different lenders require different documents, most lenders ask for PAN, Aadhaar card, address proof, etc.

But there’s also an easier and safer way. On Zype, you can complete your application with no documents or paperwork, just PAN and Aadhaar will get you the loan!

Approval And Issuance

After you have completed your application, the lender will evaluate your eligibility and approve you for a loan amount. That is when you will receive the personal loan sanction letter.

How Is A Sanction Letter Different From A Disbursement Letter?

While there might be some overlap between the loan sanction letter and the disbursement letter, they serve very different purposes. You will receive the sanction letter after you are approved for a loan. And only after you accept the letter, you will get the money in your registered bank account. After which you will receive the disbursement letter.

In simple words, a sanction letter is a green light that you’re approved for a loan and a disbursement letter is confirmation that you have received the money in your account.

Documents Required For Personal Loan Sanction Letter

You will need the following documents to complete your loan application and receive the personal loan sanction letter:

– PAN card

– Aadhaar Card

– Voter ID/ Passport/Driver’s License

– Bank Statement

– Salary Slips

– Address Proof like utility bill/ Aadhaar card/ Ration card

 *Please note the list of documents required can be different for different lenders.

Read Must: Documents Needed for Personal Loan

Why Choose A Personal Loan From Zype?

With Zype, you can get super-fast loans up to ₹500000! Complete your application in 5 minutes, get approved in 60 seconds and receive the money in your account in 24 hours. But speed is not the only thing Zype offers.

There’s a Lot More:

Collateral-Free Personal Loans:

Zype personal loans are unsecured loans. This means you don’t have to provide any assets like gold, jewellery, etc. to get access to the loan.

Affordable Interest Rate:

With Zype, get an affordable interest rate on your personal loan starting at just 1.5%.

Flexible Repayment Tenure:

Paying back the personal loan on Zype is as convenient and flexible as borrowing it. Get the money you need now and pay it back in 3,6,9 or 12 EMIs.

Instant Approval And Quick Disbursal:

Your requirement for money might be quick. And that’s exactly why Zype personal loans are quicker. With an application time of 5 minutes, an approval time of 60 seconds and a disbursement time of 24 hours, you can get instant access to the money you need.

No Documentation Or Paperwork:

Say goodbye to endless paperwork and documentation because all you need is your PAN and Aadhaar number to complete your application.

Read Must: Get Instant Personal Loan on Aadhaar Card

Tips For Reviewing A Personal Loan Sanction Letter

Before you accept the personal loan sanction letter sent by your lender, make sure you review the document thoroughly. Here are a few tips that can help:

1) Understand The Terms And Conditions:

Your personal loan sanction letter will contain important information about your loan, including the disbursed amount, applicable interest rate, repayment tenure, etc. Make sure you understand all these terms of borrowing as everything from your disbursement to repayment will be on that basis.

2) Clarify Any Doubts Before Accepting The Letter:

If you don’t understand or have any objections to your terms of borrowing, contact your respective lender to get it solved. It’s important to do this before accepting the sanction letter.

3) Confirm The Validity Period:

Different lenders have different validity periods on their loan offers. This can range anything from days to months. If you want to take a personal loan from a lender, make sure you confirm the validity period.

4) Keep A Copy For Your Reference:

A personal loan sanction letter is written confirmation from the lender that they’re obligated to give you the personal loan. This is why it’s important to maintain a copy for your reference.

Read Must: Personal Loan Disbursement Process – How it Works?


Understanding and educating yourself about the money you borrow can help you ensure you don’t miss any repayments and stay on top of your financial health. The first step towards doing that is understanding your personal loan sanction letter which you have already done by reading this blog! The next step is to apply for a personal loan which you can start now by downloading the Zype app from PlayStore/AppStore.

Frequently Asked Question

What Happens After A Loan Sanction Letter?

After you receive your loan sanction letter from a lender, you have to accept the offer and terms of use. The lender will then disburse the loan amount directly into your registered bank account.

Can Personal Loans Be Cancelled After Sanction?

No, you cannot cancel a loan after the sanction. However, if you haven’t received the loan amount, you can contact your lender and request for cancellation.

What Is The Difference Between A Sanction Letter And A Loan Agreement?

While there can be an overlap in the information provided in a sanction letter and loan agreement, a sanction letter is only the approval of a loan. However, a loan agreement is a formal contract between a borrower and a lender.

What Is The Difference Between A Sanction Letter And A Loan Offer Letter?

A sanction letter is a letter through which a lender communicates to the borrower that they’re approved for a loan. A loan offer letter is a formal document sent to the borrower that contains all the terms and conditions of borrowing. The borrower receives the loan only after accepting the loan offer letter.

How Long Is A Personal Loan Sanction Letter Typically Valid?

The validity of a personal loan sanction letter can range between 30 days to even 6 months, depending on the lender.

Yes, a personal loan sanction letter can be used as a legal document.

Are There Any Hidden Fees Or Charges That May Not Be Explicitly Mentioned In The Sanction Letter?

All the additional charges on the borrowed amount including your interest rate and processing fees are mentioned in the loan sanction letter.

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