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A personal loan agreement is a legal contract between a borrower and a lender, which can be a bank, credit entity, or individual. This contract is legally binding and is distinct from standard loans, which specify how funds must be used (e.g., student loans, mortgages). Personal loans offer more flexibility in terms of usage and are typically unsecured, though some may require collateral, with the specifics detailed in the contract. Essential components of a personal loan include the names, addresses, and signatures of both parties, the state of execution, the contract date, and the total loan amount.
