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Personal Loan Sanction Letter: Meaning & Importance

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Created on
April 19, 2023


What’s Inside

A personal loan gives you a handy credit line to fund various expenses - from medical to travel. While several online guides help you determine the application process, most leave out the part about 'how to know if your request has been approved?' 

It's pretty simple. You get a personal loan approval letter from your lender. This letter states that the lender has cleared your loan application under specific terms and conditions. Also known as the loan sanction letter, it is one of the essential documents in the loan approval process.

What is a Personal Loan Approval Letter?

A personal loan approval letter is a lender-issued document that qualifies as proof of approval. This signals that the lender has green-lighted your loan request. The components of a personal loan approval letter clearly outline the terms and conditions for its approval. 

While personal loan sanction letter formats can vary from one lender to the next, most contain the following particulars:

  • Loan application number
  • Sanctioned loan amount
  • Type of interest rate applicable (fixed, floating, or mixed)
  • Rate of interest applicable
  • Loan tenure
  • EMI
  • Processing fees and other charges
  • Validity of the letter

Note: Most personal loan sanction letters are valid for up to 6 months. If this validity window expires, you will have to start the application process from scratch. Moreover, this letter is not equivalent to a disbursal letter the lender sends once the loan agreement is signed. 

Is a Personal Loan Approval Letter Really That Important?

Yes. While not your disbursement letter, your personal loan approval letter is just as important. Here's a list of reasons why you should assess, sign, and preserve this letter:

  • It is equivalent to a letter of acceptance by your lender. Once you get this letter, you know that the vetting process has ended, and your loan stands approved - should you choose to sign the letter. 
  • The terms of your loan application are clearly outlined in this letter. This includes essential particulars like your loan tenure, ROI, sanctioned amount, and the processing fees and prepayment charges associated with the loan. 
  • Reviewing this comprehensive loan document helps you avoid the hassle of juggling paperwork. More importantly, assessing these terms and conditions lets you decide whether to proceed with the loan. 
  • If you had anticipated better lending terms, you could leverage this letter to get better interest rate quotes from other lenders. Moreover, if you've applied to two lenders, you can compare the two approval letters and pick the better offer. 
  • Personal loan approval letters ensure transparency between you and the lender. If any loan terms are unclear, you can bring them up with the lender before signing the loan agreement. 
  • Your personal loan sanction letter can substantiate the loan terms discussed between you and the lender. Simply put, it can serve as a communication document between the two parties. You can use it to settle any disputes arising in the future between you and the lender.
  • Your personal loan approval letter mentions your EMIs and repayment duration. Reviewing these EMI numbers helps you assess your ability to manage the loan, given your expenses. 

Can I Improve My Personal Loan Approval Chances?

To improve your chances of getting an approval letter, you can lower your debt-to-income ratio and clear outstanding debts to improve your CIBIL score. Having a stable source of income and the right documents in place expedites the verification process, improving your approval chances. 

However, waiting for your personal loan approval can take a while. If you need immediate funds and have a good CIBIL score, you can rely on Fi Money's pre-approved instant loans borrowing a maximum of Rs. 5 Lakhs at pocket-friendly rates. 

Frequently Asked Questions

What is a personal loan sanction letter? 

A personal loan sanction letter qualifies as an official loan approval document issued by the lender after verifying the loan request. It outlines all the terms and conditions of the loan, including loan amount, ROI, EMI amount, tenure, fees, etc. 

How do you sanction a personal loan? 

To get a personal loan sanctioned, you must meet the lender's eligibility criteria and submit the necessary supporting documents. The lender will then review the application, check your credit history, and assess the documents to sanction the loan if the application meets its requirements. 

Can I reject the loan after getting the sanction letter?

Yes. If you're unhappy with the loan terms, you can reject the loan even after receiving the sanction letter. 

Where can I get a loan sanction letter?

You can only receive a loan sanction letter from your lender. If you've applied for a personal loan, you can expect one from the lender once the verification is completed. 


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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Personal Loan Sanction Letter: Meaning & Importance


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