A loan agreement is a contract between the borrower and the lender that sets the terms for the borrower to make a loan. A loan can be taken by a credit institution, friends, family member, etc. A loan contract is essential, regardless of the beneficiary. Even if the loan is given to a friend or family member, it is always better to have a loan agreement. It serves as a legal document for resolving disputes that may arise in the future between the borrower and the lender. A loan agreement must be signed by both parties to avoid future disputes. A loan agreement contains the following information:.