A loan agreement is a legal document between a lender and a borrower that outlines the terms of a loan. It specifies the amount of money being borrowed, the interest rate, and the repayment schedule. This agreement helps protect both parties by clearly stating their rights and responsibilities, ensuring that the borrower understands how and when to repay the loan.
In a loan agreement, important details such as collateral, if any, and the consequences of defaulting on the loan are also included. This document serves as a reference point for both the lender and the borrower, making the borrowing process more transparent and secure.
