Difference between Facility Letter and Loan Agreement

As a professional, it`s essential to understand the difference between facility letter and loan agreement. These two legal documents are often used interchangeably, but they are not the same. Understanding the difference between them can help you ensure the accuracy and clarity of your content.

Facility Letter

A facility letter is a legal document that outlines the terms and conditions of a loan, including the amount, interest rate, and repayment terms. It also sets out the security that the lender requires, such as personal guarantees or collateral, to protect the lender`s interest.

A facility letter is typically issued by the lender and sent to the borrower after the loan has been approved. It serves as a formal offer of the loan and includes all the terms and conditions that the borrower must agree to before the loan can be disbursed.

Loan Agreement

A loan agreement, on the other hand, is a more comprehensive legal document that governs the entire loan transaction. It outlines all of the terms and conditions of the loan, including but not limited to the interest rate, repayment terms, security, and default provisions. It`s essentially a contract between the lender and the borrower that sets out all the legal obligations and responsibilities of both parties.

Unlike the facility letter, the loan agreement is a legally binding document that must be signed by both the lender and the borrower before the loan can be disbursed. It`s a comprehensive document that protects both parties and ensures that the loan transaction is conducted in accordance with the law.

Key Differences

The key difference between a facility letter and a loan agreement is that the facility letter is a formal offer of the loan, while the loan agreement is a comprehensive legal document that governs the entire loan transaction.

The facility letter only serves as an offer of the loan, and the borrower can choose to accept or reject it. On the other hand, the loan agreement is a legally binding document that outlines all of the legal obligations and responsibilities of both parties.

In summary, a facility letter and a loan agreement are two different legal documents that serve different purposes. As a professional, it`s essential to understand the difference between them to ensure that your content accurately reflects the nature of the loan transaction.

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