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January 19, 2023
A loan commitment is a formal letter from a lender saying that the applicant has completed all of the loan requirements. The lender commits the borrower a particular sum of money. Many loan agreements are open-ended, which means the loan is not a one-time, lump-sum payment that the borrower must repay. Instead, the borrower can keep using this amount as long as they continue to pay it back. As a result, it is comparable to a revolving line of credit, such as a credit card. If the borrower repays a portion of the loan amount, the lender deducts the borrower's principal debt payment. An open-ended loan promise is subject to the borrower's credit history and the fulfillment of specific requirements. A loan promise may be secured or unsecured.