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A personal loan agreement is a legal contract between a lender and a borrower for lending money. The lender can be a bank, credit entity, or an individual, and this contract is legally binding. Unlike standard loans, which specify how funds must be spent (e.g., student loans or mortgages), personal loans offer flexibility in usage. Personal loans are often unsecured, meaning they aren't tied to assets, but may sometimes require collateral, which will be specified 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.