What Is An Educational Loan Sanction Letter And How To Get It?

education loan sanction letter & process

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Picture of Shivani Mani

Shivani Mani

Lead, Student Success - FundRight

Getting an education loan to study abroad entails collecting numerous documents, moving across counters and reading mundane details for the loan to be approved!

An education loan sanction letter is a formal document that notifies the approval of a student loan. 

Once the student submits the application for an education loan and the pertinent documents an education loan sanction letter is issued after the verification and authorisation of the same. 

It is an acknowledgement the borrower receives after successfully getting a loan or acts as a conditional financial competence letter.

The educational loan sanction letter is a critical document to get admission abroad. 

So, let’s take a deeper look at an education loan sanction letter and how to obtain one without any hassle. 

Why Do You Need An Education Loan Sanction Letter?

The education loan sanction letter is like a preface to a book consisting of all the pertinent information. 

It contains all of the relevant information about the loan application, such as the loan amount, name, loan tenure, interest rate, margin percentage, repayment period, terms and conditions, etc. 

The student receives an education loan sanction letter via mail or as a hard copy. 

Types of Education Loan Sanction Letter

Education loan for study abroad has three distinct types of sanction letters as mentioned below:

Education Loan Sanction Letter

It’s an official document giving information about the approval of one’s education loan application. 

Following that, the lender approves the loan amount, which is then deposited into the applicant’s account or is given as a direct fee payment to the university. 

Pre-Approved Sanction Letter

Pre-approved sanction letter is required for an education loan to study abroad in certain countries like Canada. Germany etc. 

A pre-approved sanction letter is a provisional education loan sanction letter issued to a borrower prior to securing university admission.

This document is used to demonstrate financial support during the admissions process and, in some cases, the visa application process. 

After receiving their standardized test results, students can apply for instant approval for an education loan to study abroad. 

This is specific to institutions where students are required to show their financial ability to pay for their education to secure admission. 

Some of the countries that require pre-approved sanction letters are as follows:

  • Students must provide documentation of financial assistance in order to obtain a Canadian study visa, with a minimum fund requirement of CAN$ 10,000. 
  • European nations like Germany, the United Kingdom and also the United States of America have similar conditions for education. 

In-Principle Sanction Letter

A tentative sanction letter sent by the bank to the borrower is known as an in-principle sanction letter.

It specifies a specific loan amount that will be granted to a student if he or she is accepted at a specific university. It is primarily required for US universities.

While US universities require the student to demonstrate their financial competence in order to obtain an I-20, the Bank requires the applicant to show the university an I-20 in order to confirm the loan offer. 

One receives an in-principle sanction letter in such a situation. 

How to Get an Education Loan Sanction Letter?

The procedure for seeking a letter of approval for an education loan is simple and clear. 

To avoid rejection of your education loan for study abroad and the sanction letter, 

it is necessary to cross-check the documents and information you provide. 

The following three steps must be followed for the education loan sanction letter:

  • Fill out the education loan application form with accurate information. 
  • Submit all the relevant documents based on the bank’s requirements. 
  • Receive the education loan sanction letter once approved. 
Note: While applying for an education loan for study abroad, it is advisable to fill out the application for an education loan sanction letter prior to a month to receive an estimated amount and begin the visa process. 

Documents Required For Education Loan Sanction Letter

An education loan sanction letter is issued only after the submission and authorisation of the documents. 

As the process goes, the below-listed documents are verified by the bank authorities for an education loan to study abroad:

Note: An education loan co-applicant is an additional borrower for the primary applicant’s education loan. They are in charge of paying back the student loan if the applicant fails to repay it. 
  • Application Form

A completely filled and signed loan application has to be submitted to the bank authorities. 

Ensure that all the required information is filled in correctly with no spelling or numerical errors. 

  • Residence Proof

To obtain an education loan to study abroad, students need to present proof of their Indian residence proof with their co-applicants residence proof. 

Aadhar Card, Driving License, passport, or voter ID card can be used for the same. 

  • Academic Documents

Students’ mark sheets and external exams scorecards like IELTS, and GRE to name a few are mandatory for an education loan sanction letter. 

If the student has received any scholarship, the details about the same have to be provided. 

  • Income Proof of the Co-applicant

Different documents are required to apply for a loan based on the employment type of the co-applicant. 

If the co-applicant is self-employed. A Business address proof, the last 2 years of IT returns, and a TDS Certificate shall be required to apply for an education loan to study abroad. 

In the case of a salaried co-applicant, salary slips for the last 3 months and last 2 years IT returns are mandatory. 

  • Statement of Expenses

A student presents a brief detail about all the expenses incurred for their educational purpose. 

While applying for an education loan to study abroad, living costs, visa expenses, tuition fees, hostel fees etc. have to be mentioned. 

  • Passport Photographs

2 passport photographs shall be required for an education loan to study abroad. 

Ensure that the pictures are recent and in formal attire. 

  • Proof of Admission

Bank officials will require proof of admission to issue an education loan sanction letter. 

The official admission letter or the offer letter has to be submitted along with other information. 

This is a prerequisite for an education loan to study abroad. 

  • Identity Proof

It is the most basic requirement for an education loan sanction letter.  

As identity proof, you can submit a copy of your Aadhar card, voter ID, or passport for identity verification. 

Documents Required From The Co-Applicant

A co-applicant is vital for the approval of an education loan sanction letter. 

Hence, bank officials require several documents of your co-applicant. 

The co-applicant must submit the following documents for the applicant’s education loan to study abroad:

  • Co-Applicant’s bank account statement for the last 6 months
  • Identity Proof
  • Address Proof
  • Last 2 years’ IT returns
  • Salary slips of last 3 months for salaried co-applicant
  • Business address proof and TDS certificate for self-employed co-applicant 

Suggested Read: Education loan to Study in Italy for an Indian 

Education Loan Sanction Letter In Public Sector Banks in India

Banks like State Bank of India, and Bank of Baroda are considered public sector banks. 

Public banks offer a wide range of education loans to study abroad. 

The public sector banks take a slightly longer duration for the approval of the educational loan as compared to other sources. 

Therefore, it is advisable to apply for the loan a month in advance. 

Education Loan Sanction Letter In Private Sector Banks in India

Private sector banks include ICICI Bank, HDFC Bank, and Axis Bank, to name a few. 

These banks follow a similar process for education loans as public sector banks, but there are some advantages or policies that make the process easier.

Axis banks, for example, provide a document pick-up service at your home. ICICI bank, on the other hand, offers an instant education loan with an immediate loan sanction letter. 

The private sector banks can issue an education loan sanction letter faster than the public sector banks. 

Note: A higher CIBIL score of the co-applicant and a good GRE score of the applicant can help in securing a loan sanction approval soon. 

Financial constraints are a common reason for not pursuing education abroad. 

But the low-interest rates on educational loans offered by various banks across India can help you fulfil your dream. 

One of the best funding options is offered by FundRight for students aspiring to study abroad. 

Moreover, the education loans to study abroad cover numerous expenses like tuition fees, travel (tickets), house rent, university fees, food expenses, living expenses, a laptop etc. 

This ensures that there are no hurdles in your study. 

Frequently Asked Questions About Education Loan Sanction Letter

Question 1. Can a sanctioned education loan be cancelled?

Ans. Yes, it is possible to cancel a student loan. However, the applicant must be familiar with the terms and conditions that must be followed in order to cancel the educational loan.

Question 2. What is the validity period of an education loan sanction letter?

Ans. An educational loan sanction letter in India is valid for a period of six months since the date of issuance. 

Question 3. What happens if I fail to pay my education loan?

Ans. If you don’t pay your education loan in India, the lender will send you and your guarantor notices about the failure of payment. You will default on your loan if you ignore the warnings, and your credit score will suffer greatly as a result. This poses a threat to securing any future loans. 

Question 4. Can I change the university after the education loan sanction?

Ans. Even after your education loan has been approved, you can change universities and modify your loan terms. However, you must update the form with new information, such as the university, country, tuition fee, and other expenses, before submitting it to the bank.

Question 5. Is it possible to get an I-20 with an education loan sanction letter?

Ans. It is possible to receive an I-20 form from an American university with the issuance of the education loan sanction letter and Bank certificate. It serves as proof that the student applicant was accepted into the programme in the United States and that the student has the financial means to pay for it. The I-20 Form, which specifies the start date of the programme, must be carried out for the visa interview.

Picture of Shivani Mani

Shivani Mani

Shivani, aka 'Sheen' brings in 15+ years of experience in banking & finance. An IIM-A alumna, she actively interacts with students & provides actionable solutions to their study abroad funding issues.

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