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A personal loan agreement is a legal contract between a lender and a borrower for the purpose of lending money, which can be a bank, credit entity, or individual. This contract is legally binding. Unlike standard loans, which specify how funds must be used (e.g., student loans or mortgages), personal loans offer more flexibility for various purposes. They are often unsecured, meaning they are not tied to assets like homes or cars, though some may require collateral, which should be clearly outlined in the contract. Essential elements of a personal loan agreement include the names, addresses, and signatures of both parties, the state of execution, the date of the agreement, and the total loan amount.