When it comes to borrowing money, a written agreement is often required to ensure that both the borrower and the lender understand their responsibilities and obligations. This written agreement is commonly referred to as a contract or a loan agreement. However, there are some key differences between these two terms, and it`s important to know which one refers specifically to the written agreement that binds the lender.
A contract is a legally binding agreement between two or more parties that outlines the terms and conditions of a particular transaction or relationship. In the context of borrowing money, a contract may be used to outline the terms of a loan, including the amount borrowed, the interest rate, the repayment schedule, and any other terms or conditions that the borrower and lender agree to. A contract can be verbal or written, but in most cases, a written contract is preferable as it provides a clear record of the agreement.
A loan agreement, on the other hand, is a specific type of contract that pertains specifically to borrowing money. A loan agreement is a written contract between a borrower and a lender that outlines the terms of a loan, including the amount borrowed, the interest rate, the repayment schedule, and any other terms or conditions that the borrower and lender agree to. Unlike a contract, which can cover a wide range of transactions or relationships, a loan agreement is specifically designed to address the unique needs and requirements of borrowing money.
So to answer the question at hand, the term that refers specifically to the written agreement that binds the lender is a loan agreement. While a contract may also be used in the context of borrowing money, a loan agreement is the more specific and commonly used term. Whether you`re a borrower or a lender, understanding the terms and conditions of a loan agreement is essential for ensuring a successful and mutually beneficial transaction.