How to Read Your Loan Sanction Letter

Every field in your sanction letter — explained

Sanctioned loan amount

The maximum amount the bank has approved. This may be less than what you applied for. If so, understand why before accepting.

Disbursement amount

The amount actually released to you or the builder/seller. For home loans, this may be in tranches based on construction progress.

Rate of interest (ROI)

Shown as a spread over EBLR/RLLR (e.g., RLLR + 1.5%). Ask if this is fixed or floating and what the current RLLR is. Higher spread = more expensive loan.

Processing fee

Typically 0.5–2% + GST. Should match what was quoted at application. Query if different.

Prepayment / foreclosure charges

For floating rate loans, RBI mandates zero prepayment charges. For fixed rate loans, banks can charge 2–4%. Verify this carefully.

Repayment schedule

The EMI amount, start date, and first EMI date. Confirm the EMI matches your calculation.

Validity of sanction

Sanction letters are typically valid for 3–6 months. Disbursement must happen within this period.

Special conditions

Some letters have conditions like: deposit of original property documents, legal opinion clearance, technical valuation. Understand each condition before signing.

🚩 Red flags to watch for

⚠Interest rate higher than what was quoted verbally or in the offer letter

⚠Processing fee suddenly increased from the original quote

⚠Mandatory purchase of insurance bundled with the loan (you have the right to refuse)

⚠Foreclosure charges on a floating rate home loan (illegal under RBI guidelines)

⚠Conditions requiring you to maintain a minimum balance with the bank

⚠Stamp duty and legal fees not disclosed upfront now appearing as add-ons

If you spot any of the above, contact Guhan Capitals before signing. We can often negotiate corrections or help you switch to a better lender without delay.