Difference Between Loan Sanction Letter And Loan Capability Certificate

Difference Between Loan Sanction Letter And Loan Capability Certificate
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In your journey of study abroad, you will come across a lot of things which is necessary to understand. A lot of procedures are required in order to get an education loan to study abroad. There are some universities that will demand a loan sanction letter or a loan capability certificate to check whether your finances are backed by a lender. 

When you apply to a foreign university please read the details about the documents carefully. Some universities in the USA demand a capability certificate and some demand both. Let’s understand what are the major differences between the two. 

What is a Loan Sanction Letter?

A loan sanction letter is a document provided by the bank or any financial institution which states that you are eligible to borrow the amount which you asked for. It gives you the green light to move ahead with the process of loan disbursement. Let’s check some key highlights of a loan sanction letter:

  • The sanction letter contains all the terms and conditions of the loans like interest rate, moratorium period, duration of loan etc. 
  • A loan sanction letter is issued after checking your credit history or creditworthiness and score.
  • With the help of the sanction letter, you can secure admission into the university in the respective country.
  • After submitting the sanction letter to the university you are required to initiate the education loan disbursement process and the bank will transfer the fees directly to the university.

Also Read: Benefits of Loan Sanction Letter

What is a Loan Capability Certificate?

A loan capability certificate is prima facie proof of confirmation of an education loan being provided by the bank. In a loan capability certificate, the bank agrees to pay the entire fees demanded by the university. The university demands a loan capability certificate in order to ensure that the student will not drop out in the middle of his course at the university due to financial constraints. Let’s understand the key highlights of a Loan Capability Certificate:

  • The Loan capability letter contains the details of the student and parents/sponsor, university, program, amount of loan etc. 
  • The student must ensure that the certificate has been made on the official letterhead of the bank/financial institution and is duly signed by the issuing authority with the stamp on it. 
  • With the help of a capability certificate, you will be able to plan your accommodations and other important things. 

Also read: Benefits of Loan Capability Certificate

The difference between a Loan Sanction Letter and a Loan Capability Certificate

A loan sanction letter and a loan capability letter have some differences based on the parameter of eligibility of the student. However, issuing both documents will require you to check your eligibility based on your credit score and credit history. Let’s check some of the major differences between a sanction letter and a capability certificate:

Loan Sanction Letter Loan Capability Certificate
A loan sanction letter shows your eligibility for getting the required amount and the intent of the bank to approve the loan. A loan Capability Certificate acts as proof of getting an education loan which you can show to the concerned university that you are ready with your finances.
It mentions the eligibility criteria, interest rate, amount and the terms and conditions of the loan.It’s a letter addressing the student that the bank is ready to approve and disburse the loan. 
It works for most of the universities in major countries Usually demanded by Universities in the USA


Is the loan capability certificate and loan sanction letter the same?

A loan capability certificate is different from a loan sanction letter as it shows proof that the student is getting the education loan from the issuing bank. Whereas a sanction letter shows that the bank is willing to approve the education loan based on the stated terms and conditions.

Is it necessary to submit a loan capability certificate even after submitting the loan sanction letter?

It totally depends on the norms and procedures of the university to which you are applying. Usually, some universities in the USA demand a capability certificate to ensure the financial status of the students. 

What comes after the loan sanction letter?

After the bank sanctions your loan and you move ahead with the process the bank starts procedures to deposit the first instalment of your education loan. You will get all such details and the amount break up in your loan disbursement letter.

The loan capability certificate and loan sanction letter both act as evidence of financial support. The universities demand these documents to ensure the completion of the program to which you are being admitted. No university wants its students to just drop their studies due to financial issues. Hence, it is advisable to check all the documents which the university requires and get them from the concerned department.

To know more about loan sanction letter and loan capability certificate, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience. Follow our social media handles on Twitter, LinkedIn and Instagram

About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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