As the name suggests, a loan agreement is a formal contract between a lender and borrower detailing the terms of a loan. This document includes important information such as the loan amount, interest rate, repayment schedule, and consequences of default. By signing a loan agreement, both parties agree to adhere to its terms, creating a legally binding commitment. The agreement protects both lender and borrower by clarifying rights and responsibilities, helping prevent misunderstandings. Loan agreements are used for various loan types, from personal and business loans to mortgages.