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3+ Loan Sanction Letter Templates in Google Docs | Word | Pages | PDF

What do you do when you need financial aid? You apply for a loan. However, you cannot just get a loan as soon as you ask for it. The loan needs to be sanctioned, by the appropriate bank or the loan agency. Only after the loan is sanctioned you can get the loan amount that you applied. To authorize this and validate the loan, a loan sanction letter is drafted. Loan Sanction Letter Templates are used to make these letters.

14+ FREE & Premium Loan Letter Templates - Download NOWBeautifully Designed, Easily Editable Templates to Get your Work Done Faster & Smarter.

7 Steps on How to Write a Loan Sanction Letter

Step 1: Ask for the Reasons

The borrower can have several different reasons for applying for the loan. Before you write the sanction letter, it is your responsibility as the lender to ask for these reasons. The type of loan to be sanctioned is determine based on the reasons. These include home loans, personal loans, education loans, etc. Discuss with the borrower if you think that the reason being provided is not a valid one. After this, you can proceed to the next step only if the reasons are legit.

Step 2: Mention the Eligibility Standards

To apply for a loan, a person has to match the eligibility criteria of the agency. The loan eligibility criteria for applying for loans differ from each other depending on the agency. A few common ones include the age, the income, and the profession of the person, and the maximum loan limit. The income is perhaps the most crucial in the criteria list. The person applying for the loan has to have a lawful and valid source of income to get the loan sanctioned.

Step 3: Define the Monthly Installments

The income level and income source of the person will determine the fact if the person has the capability of paying back the rents or not. Once this has been checked, you can determine the monthly payments that need to be made by the borrower. The monthly payments refer to the cash amount that is to be paid monthly by the borrower to the lender. The interest rate is also added to this account.

Step 4: Ask for Approval

In some cases, the lender himself or herself cannot approve the loan to be sanctioned. In such cases, there are higher authorities present that have the jurisdiction to approve the loan. The loan agency needs to consult with the concerned higher authority to get approval. For example, some Indian banks cannot sanction or approve loan amounts that exceed a certain limit. They have to send the loan portfolio to the RBI for approval.

Step 5: Ask for the Documents

When you have all the elements of the loan compiled in one place, you need to ask the borrower to provide you with the required documents. The list of the documents that need to be provided differ based on the fact if the borrower is an individual or a company. In the case of an individual, you need to ask for the person’s identification proof, proof of income, passport size photograph, address, and full contact information. In the case of a company, you need to ask for memorandum & articles of association, the certificate of the organization, the land documents, the business plan, and other relevant ones.

Step 6: Provide the Required Clauses

Two important clauses need to be mentioned in the loan sanction letter. One is the cross-default clause where it is stated that if any of the loans of the borrower has defaulted, it would be constituted as the default of the borrowing. The other clause is the pari passu clause. This clause is placed to ensure that the lender has the same level of security that is provided to new lending. You can also include a negative pledge along with this section that would refrain the borrower from increasing other finance.

Step 7: Mention the Limitations

The last section of the letter will include the limitations or restrictions in place for the loan sanction. Two of the most common restrictions applied in such cases include the limitation on additional indebtedness and the limitation on restricted payments. The first limitation would restrict the borrower from taking on further indebtedness. The second limitation would restrict the borrower’s ability to pay dividends. If you want, you can also add other limitations to the letter. Or you can also opt not to put restrictions at all.

3+ Loan Sanction Letter Templates

1. Free Loan Sanction Letter

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  • Google Docs
  • Word
  • Pages

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A loan sanction letter is drafted when a borrower puts forth a request to borrow money from a lender for certain specific purposes. You can make the letter easily with the help of this letter template in Word. This letter would ensure that the loan the borrower has asked for gets sanctioned. The other file formats available for this template include Google Docs and Pages.

2. Education Loan Sanction Letter Template

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Education is the birthright of every individual. However, not everyone has the means to afford his or her education. That is why education loans are there to provide financial aid. If you want to write a good education loan sanction letter, then you need to download this professional letter template. This template has been designed specifically to help you make loan sanction letters for educational purposes.

3. Loan Sanction Letter Example

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  • PDF

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Are you a rookie at writing loan sanction letters? Then we suggest that you take a look at this sample letter template that we are providing before you start making your own. This template provides a file containing an example of a loan approval letter that can help you as a guide. You can download the template for use on both Mac and Windows operating systems.

4. Request for Loan Sanction Letter in PDF

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When an individual or a company comes to you asking for a loan, you need to write a loan sanction letter to be able to provide the loan amount. With this free letter template, you can get access to a sample request cum sanction letter for a personal loan that can help you write your loan letter efficiently and quickly. The template features original suggestive headings and content.

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