While loans can occur between family members — what`s called a family credit agreement — this form can also be used between two organizations or entities that have a business relationship. A loan is not legally binding without signatures from both the borrower and the lender. For additional protection for both parties, it is strongly recommended to have two witnesses signed and to be present at the time of signing. Collateral – A valuable object, such as a home, is used as insurance to protect the lender if the borrower cannot repay the loan. A person or organization that practices predatory loans by calculating high interest rates (known as the « credit shark »). .