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A personal loan agreement is a legal contract between a lender and a borrower for lending money, which can be a bank, credit entity, or individual. This contract is legally binding. Unlike standard loans, which dictate specific uses for funds (like student loans or mortgages), personal loans offer greater flexibility in spending. They are typically unsecured, meaning they are not tied to collateral such as homes or cars; however, some may require collateral, which should be specified in the contract. Essential elements 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.
