COMMITMENT LETTER Meaning and
Definition
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A commitment letter is a formal document issued by a lender or financial institution to a borrower, outlining the terms and conditions of a loan or other financial agreement. It serves as a written commitment or promise to provide the necessary funds, subject to the fulfilment of certain conditions and requirements.
The commitment letter typically includes important details such as the loan amount, interest rate, repayment terms, collateral requirements, and any applicable fees or charges. It specifies the duration for which the offer remains valid and may also highlight any special conditions or contingencies that need to be met before the loan is disbursed.
This document serves as a legally binding agreement between the lender and borrower, providing both parties with a clear understanding of their obligations and responsibilities. The borrower can rely on the commitment letter to secure the desired funds, while the lender is obligated to honor the provided terms and conditions, assuming the borrower meets the specified requirements.
Additionally, the commitment letter can be used as evidence of financial support when dealing with third parties, such as real estate transactions or business acquisitions. It helps to establish the borrower's credibility and financial standing, and demonstrates that the lender is willing to extend the requested financing.
Etymology of COMMITMENT LETTER
The word "commitment" originated from the Latin word "committere", which means "to entrust" or "to engage". It combines the prefix "com-" (meaning "with" or "together") and the verb "mittere" (meaning "to send" or "to let go"). "Letter" comes from the Old English word "lettere", which was derived from the Latin word "littera", meaning "a written communication" or "an epistle". So, the etymology of "commitment letter" implies a written document or communication that expresses an engagement or trust.
