The Loan Agreement Letter is a crucial document used in Saudi Arabia when formalizing lending arrangements between parties, whether they are financial institutions, companies, or individuals. This document type is specifically designed to comply with Saudi Arabian law and Sharia principles, making it distinct from conventional loan agreements used in non-Islamic jurisdictions. The letter format provides a more approachable yet legally robust structure for documenting loan terms, including the principal amount, profit rate (rather than interest), repayment schedule, and any security arrangements. It's particularly important in Saudi Arabia where all financial transactions must align with Islamic finance principles that prohibit traditional interest (riba). The document includes specific provisions for Sharia compliance, regulatory requirements from SAMA, and necessary terms for enforceability under Saudi law. This type of agreement is commonly used for both commercial and personal loans, requiring careful attention to both legal and religious compliance aspects.

1. Sender and Recipient Details: Full names and addresses of both the lender and borrower

2. Date: The date of the letter, which will be the effective date of the agreement

3. Subject Line: Clear identification that this is a Loan Agreement Letter

4. Opening Salutation: Formal greeting to the recipient

5. Reference to Prior Discussions: Mention of any previous communications or meetings regarding the loan

6. Loan Amount and Purpose: Clear statement of the loan amount and its intended use

7. Key Terms: Essential terms including profit rate (instead of interest), repayment schedule, and duration

8. Repayment Terms: Detailed explanation of how and when repayment should be made

9. Sharia Compliance Statement: Declaration that the agreement complies with Islamic principles

10. Security Details: Description of any collateral or security provided for the loan

11. Default Provisions: Consequences of failing to meet the repayment obligations

12. Closing Statement: Request for acknowledgment and acceptance of terms

13. Signature Blocks: Space for both parties to sign and date the agreement