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A personal loan agreement is a legal contract between a lender and a borrower for borrowing money. Lenders can be banks, credit entities, or individuals, and the contract is legally binding. Unlike standard loans, which dictate how funds must be used (such as student loans or mortgages), personal loans offer flexibility in usage. They are often unsecured, meaning they aren't tied to assets like homes or cars, though some may require collateral, which should be outlined in the contract. Essential components of a personal loan include the names, addresses, and signatures of both parties, the execution state, the contract date, and the total loan amount.
