An agreement basically means a negotiated and legally binding arrangement between parties for a course of action.

There are many forms of agreements such as Non-Disclosure Agreement, Settlement Agreement, Contract, Memorandum of Understanding, Loan Agreement or Grant just to name a few.

In this scenario, let us take a look at the differences between loan and settlement agreement.

What Is A Loan Agreement?

A loan agreement typically refers to an agreement between a creditor and debtor whereby the terms of the loan granted by the creditor to the debtor are encapsulated.

Common terms in such agreements include the sum of the loan, the interest payable, the repayment terms and whether the loan is secured against any assets or backed by a guarantee from a third party.

These loan agreements are proof that both parties, that is the borrower and the lender have a commitment that the sum on loan is being used for a specified purpose, how and when the loan will be paid back as well as the interest rates being tagged to the principal amount.

What Is A Settlement Agreement?

A settlement agreement on the other hand typically refers to an agreement between parties to resolve an ongoing dispute. Such a dispute could potentially have arisen from a loan agreement in which parties are engaged in litigation over.

Parties often enter into such settlement agreements to avoid further legal proceedings which can be costly.

It is common for settlement agreements to include a payment provision from one party to another, which could include terms not dissimilar to that of loan agreements such as a payment of the settlement sum by installments, and a default clause that accelerates payment.

For settlement agreements, even if they are not registered with the Court, they are still legally binding.

By registering with the District Court, it is made enforceable as an Order of the District Court, and this make future legal proceedings easier when compared to not having the cases registered.

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