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Loan Assumption Agreement for Malaysia

Loan Assumption Agreement Template for Malaysia

A legally binding agreement governed by Malaysian law that facilitates the transfer of loan obligations from an original borrower to a new borrower (assuming party), with the lender's consent. The document outlines the terms and conditions of the loan assumption, including payment obligations, security arrangements, and compliance requirements under Malaysian financial regulations, particularly the Financial Services Act 2013 and the Contracts Act 1950. It ensures a smooth transition of loan responsibilities while protecting the interests of all parties involved.

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What is a Loan Assumption Agreement?

A Loan Assumption Agreement is essential in situations where an existing loan obligation needs to be transferred from one party to another in Malaysia. This document is commonly used in property transactions, business acquisitions, or debt restructuring scenarios where a new party wishes to take over an existing loan. The agreement must comply with Malaysian banking regulations, including the Financial Services Act 2013 and relevant Bank Negara Malaysia guidelines. The document typically includes details of the original loan, terms of assumption, lender's consent, and any security arrangements. For Islamic financial institutions, the Loan Assumption Agreement must also adhere to Shariah principles and comply with the Islamic Financial Services Act 2013.

What sections should be included in a Loan Assumption Agreement?

1. Parties: Identifies all parties to the agreement: the original borrower, the assuming party, and the lender

2. Background: Recites the details of the original loan agreement and the intention to assume the loan

3. Definitions: Defines key terms used throughout the agreement

4. Assumption of Loan: Details the assuming party's agreement to take over the loan obligations and the original borrower's release

5. Lender's Consent: Documents the lender's approval of the assumption and any conditions attached

6. Representations and Warranties: Statements of fact and assurances from the assuming party regarding their ability to perform the loan obligations

7. Effective Date and Conditions Precedent: Specifies when the assumption takes effect and any conditions that must be met beforehand

8. Payment Terms: Confirms the payment obligations being assumed, including amount, interest rate, and payment schedule

9. Covenants: Ongoing obligations and restrictions applicable to the assuming party

10. Events of Default: Circumstances that constitute default under the assumed loan

11. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and establishes jurisdiction for disputes

What sections are optional to include in a Loan Assumption Agreement?

1. Security and Collateral: Required if the original loan is secured by collateral or if new security is being provided

2. Islamic Finance Provisions: Required if the loan is Shariah-compliant and involves Islamic banking principles

3. Guarantees: Required if there are third-party guarantors for the assumed loan

4. Tax Provisions: Include when there are specific tax implications or requirements related to the loan assumption

5. Insurance Requirements: Include when specific insurance must be maintained by the assuming party

6. Assignment and Transfer: Include if the parties wish to specify conditions for future transfer of the loan

7. Force Majeure: Optional clause dealing with unforeseen circumstances affecting loan performance

What schedules should be included in a Loan Assumption Agreement?

1. Original Loan Agreement: Copy or summary of the original loan agreement being assumed

2. Payment Schedule: Detailed schedule of payments including principal and interest calculations

3. Security Details: List and description of any security or collateral associated with the loan

4. Condition Precedent Documents: List of documents required before the assumption becomes effective

5. Compliance Certificates: Forms for ongoing compliance certification if required

6. Consent Documents: Any third-party consents or regulatory approvals required for the assumption

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Malaysia

Publisher

Ƶ

Document Type

Financing Agreement

Cost

Free to use
Relevant legal definitions






























Clauses



























Relevant Industries

Banking

Financial Services

Real Estate

Construction

Manufacturing

Commercial Property

Retail

Healthcare

Agriculture

Infrastructure

Islamic Finance

Relevant Teams

Legal

Finance

Credit Risk

Compliance

Corporate Banking

Retail Banking

Islamic Banking

Operations

Treasury

Risk Management

Commercial Banking

Relevant Roles

Legal Counsel

Finance Manager

Credit Officer

Loan Officer

Compliance Officer

Banking Manager

Risk Manager

Chief Financial Officer

Corporate Secretary

Property Manager

Transaction Manager

Islamic Banking Officer

Treasury Manager

Relationship Manager

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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