A loan agreement letter is a formal correspondence used by lenders to offer loans to prospective borrowers.
Specifically, a loan agreement letter is a shortened and abbreviated contract summarising the terms of the loan.
A loan contract conversely, is a legally binding agreement that requires signatures from lenders and borrowers.
Lenders, primarily banks and financial institutions, use a combination of a letter and contract depending on their processes.
We suggest you use both documents when engaging with new borrowers, as the letter is a simple summary that’s easy to interpret. At the same time, the contract provides legal proof of the commitments each party has made.