What is the consequence of not having a written loan agreement?

When a loan agreement is not documented in writing, it can lead to significant challenges in enforcing the terms of that loan. In many jurisdictions, verbal agreements, while potentially binding, are often difficult to prove. This lack of written documentation means that if a dispute arises—such as non-repayment—there may not be sufficient evidence to support the lender's claim in a court of law. Written agreements provide clarity and are crucial for establishing the obligations and rights of both parties involved.

In the context of this question, the consequence of not having a written loan agreement is primarily that the loan cannot be effectively used as evidence in court if the lender needs to take legal action for recovery of the amount loaned. This emphasizes the importance of documented agreements in financial transactions.