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A personal loan agreement is a legal contract between a lender and a borrower for lending money, which can involve banks, credit entities, or individuals. It is legally binding and differs from standard loans, which dictate specific uses of funds (e.g., student loans or mortgages). Personal loans offer more flexibility in usage and are often unsecured, though some may require collateral as specified in the contract. Essential components of a personal loan agreement include the names, addresses, and signatures of both parties, the state of execution, the contract date, and the total loan amount.
