Education Loan

Education Loan Sanction Letter and Process: A Comprehensive Guide

Education Loan Sanction Letter and Process: A Comprehensive Guide

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Read GyanDhan’s guide on education loan sanction letter, format and sample of education loan sanction etter and how to get sanction lender from lenders.

GyanDhan
Rohit Gidwani
Updated on:  14 Jun 2024  | Reviewed By: 
Aman 
| 32K | 12  min read

The education loan process is long-winded and fraught with multiple steps. 

It starts with you researching the eligibility for a loan. After reading the lengthy novel-like terms and conditions, you understand maybe one or two things. The next is filling up the application form. Do you know all the documents that you have to submit? Probably not. So you run from pillar to pillar, gathering the documents you need to submit just the next day. After this marathon, you finally submit your loan application. Now you have to wait for some letter. And the wait, still, continues.

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What is an education loan sanction letter?

A sanction letter is an official document provided by the lender that indicates the basic information about the education loan, such as the loan amount, student’s (borrower) name, interest rate, loan tenure, and other terms and conditions. It is proof that the student has successfully applied for and been granted the loan.

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How and when will you get a sanction letter?

The sanction letter is either sent by post or handed a hard copy to the student against acknowledgment. It is given once the loan is approved and sanctioned after the student submits the loan application form and the required documents. 

A loan sanction letter can be submitted as proof of funds for your admission and visa purposes.

Some foreign universities require students to submit proof of their ability to pay for their education before granting admission. Students must show proof of funds while applying for a student visa for countries like the USA, UK, Australia, and Germany. 

For example, to get an I-20, you must submit proof of financial support, for which the minimum fund requirement is 10,000 USD. In this case, a loan sanction letter makes you eligible for an I–20.

 

Check Your Education Loan Eligibility

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What is a pre-approved sanction letter? 

Generally, education loans are sanctioned once students submit proof of securing admission abroad. However, students often need a sanction letter before getting admission to a university. In this situation, a pre-approved sanction letter helps them. 

A pre-approved sanction letter is a provisional sanction letter given to the borrower before they secure admission to a university. This letter can prove financial support during the admission process and, for select countries, during the visa process. 

Students can apply for a pre-approved education loan after receiving their standardized test scores. Remember, this facility is available with select lenders. If the lender finds any discrepancy with your application or submitted documents later, the pre-approved loan can get canceled. 

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Format of an education loan sanction letter

The format of an education loan sanction letter varies for different lenders. While some lenders issue a 2 - 3 page long sanction letter, some others make it concise to fit within one page. 

  • list items A sanction letter is addressed to the borrower and co-borrower
  • list items It will contain comprehensive information on the loan that the student can use the letter for future reference
  • list items The sanction letter is dated, and the validity is mentioned 
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    Sample of an education loan sanction letter

    Based on the format mentioned above, here is a sample for an education loan sanction letter. Since the template for each lender varies significantly, we have adopted a format followed by a prominent public sector bank in India for study abroad education loans. 

    Education loan sanction letter 

    XYZ Bank letterhead

     

    To, 

    Date: 20/07/2023

    Mr. ABC

    S/O BBB
    R/O New Delhi
    (Adress of the borrower)

    Mr.BBB

    (Adress of parent/ co-borrower)

    Dear Sir/ Madam,

    Subject: 

    EDUCATION LOAN SANCTION OF Rs. 30 LAKHS

    We are pleased to inform that we have sanctioned an education loan of Rs. 30,00,000 (Rupees Thirty Lakhs) in your favor under the terms and conditions given below.

     

    Terms and conditions of loan sanction

    Name of the borrower

    ABC

    Name of the co-borrower

    BBB

    Name of the guarantor

    CCCC

    Course details

    Master of Business Administration, York University, Canada

    Amount sanctioned

    Rs. 30 Lakhs

    Rate of interest

    12% per annum

    Type of interest

    Floating

    Margin

    5%

    Credit insurance premium

    Rs. 30,000

    Repayment period

    Repayable in 120 equated monthly installments of Rs. 27,000 each w.e.f. 06/06/2026

    Holiday/ Moratorium period

    36 months

    Amount of EMI 

    Rs. 52,080

    Processing fee

    Rs. 5,000

    Documentation fee

    0.00

    Other charges

    0.00

    Disbursement

    Loan will be disbursed once the student gets the visa. All loan terms and conditions are met.

    Security details

    Primary - Assignment of the future income of the student for payment of installments

    Collateral - Credit guarantee on the house property of the co-borrower

    Guarantor - 

    Loan account number

    1234****9089

    Loan account branch

    Rajiv Chowk, New Delhi IFSC Code: BB09HB

    Penal interest, if any

    In case of default in any repayment of loan or non-compliance of the terms and conditions, the borrower shall be bound to pay a penal interest of 2% of the default/ irregular amount. 


    The above sanction is, however, subject to 

    1. Execution of the loan documents as per the bank’s format and guidelines
    2. The ROI/ EMI is subject to change from time to time
    3. The above sanction can be valid for six months from the date of issue of sanction letter
    4. Any third-party liability coming on the bank due to wrong information/ declaration given by the borrower will be his/her responsibility


    Please convey your acceptance for the terms and conditions of the sanction. 

    Thank you 

    Manager, XYZ Bank Ltd

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    Documents required for a sanction letter 

    The documents required to get a sanction letter vary depending on the type of lender. They are submitted with the initial loan application. A generalized list of documents is as follows:

    Documents required from the applicant

  • list items Loan application form filled completely and correctly
  • list items Identity proof - PAN Card, Passport, Voter ID card, etc.
  • list items Address proof - a recent copy of telephone bill, electricity bill, or water bill 
  • list items Copy of the passport 
  • list items Past academic record - 10th, 12th, undergraduate
  • list items Scores of entrance tests like GRE, TOEFL, IELTS, etc. 
  • list items Proof of admission - students can submit a conditional offer of admission if they get it 
  • list items Statement of expenses for the entire cost of education. 
  • list items Passport-size photographs 
  • list items Loan account statement of one year, if there are any previous loans taken from any lender
  •  

    Documents required from the co-applicant

  • list items Identity proof 
  • list items Proof of address
  • list items Proof of income - the documents for the same will differ depending on the type of employment, such as self-employed or salaried.
  •  

    Self-employed co-applicants:

  • list items Business address proof 
  • list items Last 2 year’s IT returns 
  • list items TDS Certificate 
  • list items Certificate of Qualification 
  • list items Bank account statement of the last 6 months 
  •  

    Salaried co-applicants:

  • list items Salary slips for the last 3 months 
  • list items Copy of Form 16 for the last 2 years or copy of IT Returns for the last 2 years.
  • list items Bank account statement for the last 6 months. 
  •  

    The applicant will have to submit collateral documents along with the above-mentioned documents in case the student has applied for a secured education loan.

     

    Want to further understand the education loan disbursement process? Watch our video for a clear step-by-step guide


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    Education loan sanction letter process

    The process of getting an education loan sanction letter is long stretched and requires multiple actions. You must choose your lender, prepare the documents, pay the processing fee, and wait for approval. The process is slightly different for various lenders, as you can see in the sections below.

    Public sector banks

    The education loan sanction process in public sector banks is slightly lengthy that can take up to one month. 

    The process to receive the sanction letter is in three steps. 

  • list items The process in banks, like State Bank of India, Union Bank of India, and Bank of Baroda, starts with filling up the application form
  • list items The applicant will have to submit the documents that are mentioned above and some additional documents that may be case-specific
  • list items The applicant have to pay the loan processing fee
  • list items Once the application is processed and accepted by the bank, the sanction letter is sent to the applicant
  • Private sector banks

    The education loan sanction letter for private banks, like Axis Bank, ICICI Bank, and IDFC First Bank, is as follows:

  • list items Fill up the loan application form online or offline
  • list items Upload the documents online or submit them to a nearby branch
  • list items The bank will verify the documents and send the application for further process
  • list items Pay the processing fee charged by the lender. Generally, the processing fee is 0.5% - 1% of the loan amount plus GST
  • list items The education loan sanction letter is sent via email or post
  •  

    For a secured loan, the bank will evaluate the property and complete the documentation, while, for unsecured education loan, the bank will evaluate and verify the credit history of the applicant and the co-applicant.

    Non-Banking Financial Companies

    The process for an education loan sanction letter for Non-Banking Financial Companies (NBFCs) starts with filling up the loan application, submitting the required documents, and receiving the sanction letter. Here are the details of the process for different NBFCs: 

  • list items HDFC Credila education loan sanction letter is issued a day after the applicant successfully pays the processing fees. On request, HDFC Credila can also issue the letter before the student secures admission to a university. 
  • list items Avanse education loan sanction letter is issued after the documents and other financial details have been verified. Moreover, Avanse offers five different types of education loans; Pre-Admission loans, Pre-Visa loans, Bridge loans, Fast-track loans, and the Certificate of Availability of Funds to help students financially at every step. 
  • list items Auxilo and InCred education loan sanction letters are issued in a synonymous manner. Auxilo and InCred also offer pre-admission education loan sanction letters to students. Auxilo takes approximately 2-3 days, and InCred 5 days to verify and issue the sanction letter. Students will have to pay the processing fee upon receiving the provisional loan approval. Read more about the education loan process of Auxilo and InCred.
  • International lenders

    International lenders like MPOWER Financing and Prodigy Finance offer education loans to students without any collateral or co-signer. They offer a provisional loan offer within 2 days of applying for the loan, which is valid for up to 2 weeks. Once the student accepts the offer, the lender issues a Loan Confirmation Letter, otherwise known as the Sanction letter.

    To ease the education loan process for the USA, MPOWER and Prodigy Finance issues two types of sanction letters:

  • list items A conditional confirmation letter if an I-20 is required from the school. 
  • list items A confirmation letter when applying for a student visa.
  •  

    The letters are available on the dashboard of the applicant’s account. Read more about MPOWER Financing and Prodigy Finance education loan process here. 

    An education loan sanction letter is a formal document outlining the details of your education loan. It serves two purposes - informing the funding details for you and answering multiple inquiries on your funding options by the university and visa authorities. 

    On receiving the education loan sanction letter, you must go through the details specified and inform the lender that you agree with the terms and conditions. Unless you don’t inform the lender, there might be no disbursement post the issuance of the sanction letter. 

    However, there is a challenge in getting a sanction letter - the process is long stretched and can lead to rejection at the last minute if you make any mistake. Avoid the lengthy process and make your application hassle-free, and get the loan sanction letter within days of submitting the documents. Take advantage of the opportunity - check your education loan eligibility now. 

     

    Read also:

  • list items HDFC Credila Disbursement Process
  • list items Avanse Education Loan Disbursement Process
  • list items Disbursement Process of InCred Education Loan
  • list items HDFC Credila Abroad Education Loan
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    Frequently asked questions

    How to get an education loan sanction letter from SBI online?

    To get a sanction letter online, you must apply for any of the SBI education loan schemes online or offline, submit the relevant documents, and let the bank verify all the details you submit. If you are eligible for an education loan, the bank will issue a sanction letter, which you can request them to send via email. 

    How to write a loan sanction letter?

     As an applicant, you don't typically need to write a loan sanction letter; this is a document you'll receive from the lender once your loan application is approved. However, understanding what's included in a loan sanction letter is crucial. It outlines key details of your loan, such as the sanctioned loan amount, interest rate, tenure of the loan, repayment terms, and any conditions attached to the sanction. It may also specify the processing fee if any, and details regarding the collateral, if required for the loan. Being familiar with these aspects can help you better comprehend your loan agreement and ensure you're fully informed about the commitments you're entering into.

    What is the education loan verification process for the loan sanction?

    When you apply for an education loan, the lender examines all the documents for security purposes. The verification process involves legal documentation of your collateral if you are applying for a secured education loan and a legal agreement with the co-applicant for unsecured education loans. 

    What would the HDFC Credila loan sanction letter contain? 

    HDFC Credila loan sanction letter is an official statement provided by HDFC Credila to an applicant showing basic loan data, like course details, loan amount, names of the borrower and co-borrower, interest rate, margin, etc. Refer to the sample of an education loan sanction letter in the blog for a detailed understanding.

    How many days does it take to issue an education loan sanction letter? 

    Public and private banks, NBFCs, and international lenders take up to 2 days to issue the sanction letter once the student pays the loan processing fee.

    Is it easy to get an education loan sanction letter from ICICI Bank?

    The ICICI education loan process is easy if your profile is strong. You can explore various schemes by the ICICI Bank and apply for the right option. Make sure you have a good academic background and a co-applicant with the required salary. 

    Can the education loan sanction letter be the proof of funds for the I-20?

    Yes. You can submit the education loan sanction letter as proof of your I-20 application. 

    Would there be any delay in getting an education loan sanction letter?

    In typical cases, there are fewer chances of delays if you meet the eligibility requirements and the documents are submitted correctly. There might be unexpected delays if your documents are not proper. It will take more time for the lender to evaluate and proceed further with your application. 

    Do all lenders provide a pre-approved loan sanction letter?

    In general, you cannot expect a pre-approved sanction letter from all the lenders without analyzing your profile. Getting a pre-approved education loan sanction letter depends on the strength of your application and the lender’s decisions. 

    Check Your Education Loan Eligibility


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