Whenever a person applies for a loan of any kind, he/she has to pay a percentage of the total amount which is known as a down payment. This down payment is usually made to a financial institute such as a bank or any non-financial institute. The down payment paid by the borrower is known as margin money. In simple words, the money which the borrower pays to contribute to a loan is regarded as the margin money. In the world of finance, every borrower is expected to contribute to the loan by paying some amount of margin money.
A person cannot get the loan amount unless he pays the margin money as specified by the loan granting institutes. So, when he has successfully paid the down payment, he should write a letter of proof so that the bank can verify the details given in that letter and proceed with granting the loan.
What is a margin money proof letter to the bank?
This is a kind of business letter that every borrower has to write to the bank in order to prove that he has paid the down payment as specified by the loan agreement. In most cases, the borrower is found writing this letter while applying for a loan for a home.
Why it is important to write a margin money proof letter?
While applying for a home loan, one needs to prove that they have contributed to the loan since the bank or any other financial or non-financial institute does not pay the full amount of the loan. The loan applicant writes this letter and provides all the necessary details to the recipient that helps the recipient confirm that he has paid the down payment.
Some institutes also have a particular percentage of the total loan amount that they want to be paid as margin money. People who don’t pay that percentage are usually not eligible for getting a loan. Those who pay the required amount are eligible and prove their eligibility by writing the letter of proof.
What information is provided by the down payment validation letter?
The details to be provided to this letter may vary as every bank or any other private firm may ask for different details to validate the payment. However, some common details might be the part of every validation letter:
- Name of the loan applicant
- Name of the institute where down payment has been made
- Date of making a down payment
- Complete address of the institute
- The total amount of loan the applicant has applied for
- Percentage of total loan the applicant has paid in the form of down payment
- Signatures of the applicant
Tips for writing the letter of proof of down payment:
Your letter should be written effectively since the financial institution might use it in various legal settings. Any kind of ambiguity can lead to the occurrence of lots of confusion and problems. Below are some tips to help you write an effective validation letter:
- Be clear:
When you are stating in the letter in which you are giving proof of something, you should try to be clear and brief. The more you write concisely, the clearer your letter is to the reader. Ask someone else to read the letter to determine how clear this letter is
- Refer to the policies of the institute you have paid the margin money:
The letter of validation should mention some policies of the institute according to which, he has paid the margin money. This will let the receiving institute know that have followed the policies. If payment of the margin money comes under the act of government or the bank, don’t forget to mention it in the letter.
- Mention the receipt and its details:
At the time of the down payment, the bank issues the receipt to the applicant that is a basic and essential proof of payment. The bank does not accept the proof unless there is a receipt of payment mentioned in the letter. A unique receipt number along with the date of issuance of the receipt and some other details can be specified in the letter.
(Position in Bank),
Dear (name of recipient),
I am writing this letter to notify your bank (name of bank) of the proof of margin money. I borrowed this money from you on (date) for the purpose of (state purpose). The money has helped me in my aim and I have been able to pay this amount in full on (state date).
I would like to thank you for providing me with this amount and hope to work with you again.
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