Loan Agreement Template for Malaysia

A Loan Agreement is a binding contract between a lender and borrower that spells out the terms of borrowing money or assets. In Malaysia, these agreements must follow the Contracts Act 1950 and typically detail the loan amount, interest rates, repayment schedule, and any collateral requirements.

Beyond basic lending terms, Malaysian Loan Agreements include specific provisions for Shariah-compliant financing options, guarantor responsibilities, and default remedies under local banking regulations. They protect both parties by clearly stating their rights and obligations, making them essential for everything from personal loans to large corporate financing deals.

Use a Loan Agreement anytime you lend or borrow money in Malaysia, especially for amounts over RM1,000. This applies to business loans, property financing, equipment purchases, and even significant personal loans between family members or friends. The agreement becomes essential when dealing with banks or licensed money lenders under the Moneylenders Act 1951.

Having a written Loan Agreement protects both parties when payment disputes arise, interest rates change, or repayment schedules need adjustment. It's particularly important for Shariah-compliant financing arrangements, corporate lending, and situations involving multiple borrowers or guarantors where clear documentation of terms and obligations becomes crucial.

• Facility Loan Agreement: Used for corporate borrowing from banks, featuring multiple drawdown options and complex repayment structures
• Money Lending Agreement: For licensed moneylenders under Malaysian law, includes statutory interest rate caps and specific consumer protections
• Car Payment Contract: Specialized for vehicle financing, with provisions for asset security and hire-purchase regulations
• Personal Loan Contract Between Friends: Simplified agreement for private lending, focusing on basic terms and mutual understanding
• Loan Guarantee Agreement: Additional security document where third parties guarantee loan repayment

• Banks and Financial Institutions: Primary lenders in Malaysia, including Islamic banks offering Shariah-compliant financing options
• Licensed Moneylenders: Regulated under the Moneylenders Act 1951, providing personal and business loans
• Corporate Borrowers: Companies seeking business expansion, working capital, or asset financing
• Individual Borrowers: Private citizens taking personal loans, home financing, or vehicle purchases
• Legal Practitioners: Lawyers who draft and review agreements to ensure compliance with Malaysian banking regulations
• Guarantors: Third parties who provide additional security by guaranteeing loan repayment

• Basic Details: Gather full legal names, MyKad numbers, and addresses of all parties including guarantors
• Loan Terms: Document loan amount, interest rate, repayment schedule, and any collateral details
• Legal Status: Check if lender requires licensing under Malaysian Moneylenders Act 1951
• Compliance Check: For Islamic financing, ensure terms meet Shariah requirements
• Payment Terms: Specify payment methods, late payment charges, and default consequences
• Security Details: List any assets or guarantees securing the loan
• Documentation: Prepare supporting documents like income statements and property valuations

• Parties' Details: Full legal names, addresses, and identification numbers of lender, borrower, and guarantors
• Loan Specifics: Principal amount, interest rate (within legal limits), and payment schedule
• Security Provisions: Details of collateral, guarantees, or charges over assets
• Default Terms: Consequences and remedies for missed payments or breaches
• Repayment Terms: Payment methods, dates, and early repayment options
• Governing Law: Malaysian law and jurisdiction clause
• Shariah Compliance: For Islamic financing, specific provisions ensuring religious compliance
• Execution Block: Signature spaces, witness requirements, and company seal sections

A Loan Agreement differs significantly from a Bond Issuance Agreement in several key aspects, though both involve raising capital. Here are the main distinctions under Malaysian law:

• Nature of Funding: Loan Agreements involve direct lending between specific parties, while bonds are tradeable debt instruments issued to multiple investors
• Regulatory Requirements: Bond issuance requires approval from Securities Commission Malaysia, whereas loans only need compliance with banking regulations
• Transfer Rights: Bonds can be freely traded in secondary markets; loans typically require lender consent for assignment
• Documentation Complexity: Bond issuance involves more extensive documentation, including prospectus and trust deed requirements
• Default Handling: Loan defaults are managed directly between parties, while bond defaults often involve a trustee acting for multiple bondholders