A loan agreement is a contract between a lender and a borrower that outlines the terms and conditions of a loan. A security agreement, on the other hand, is a separate legal agreement that creates a security interest in collateral for a loan.
In a loan agreement, the lender and borrower agree on the loan amount, interest rate, repayment terms, and any fees or penalties associated with the loan. The loan agreement may also include provisions for prepayment or early repayment, as well as events of default that could trigger collection efforts by the lender.
A security agreement, on the other hand, is a document that outlines the collateral that the borrower pledges as security for the loan. The collateral could be any asset that has value, such as real estate, inventory, or accounts receivable. The security agreement establishes the lender's rights to the collateral if the borrower defaults on the loan.
In some cases, a loan agreement and a security agreement may be combined into a single document, known as a loan and security agreement. This document would include both the terms and conditions of the loan, as well as the collateral that secures the loan.
Overall, a loan agreement establishes the terms of the loan, while a security agreement establishes the lender's rights to the collateral in case of default. Both agreements are important legal documents that should be reviewed carefully before signing.
