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 what is expected in terms of payments. In a loan agreement, important details such as the duration of the loan and any penalties for late payments are also included. This document is essential for transactions involving large sums, such as buying a home or financing a car, as it provides clarity and security for both the lender and the borrower.