Assignment Of Loan

Jump to section, what is an assignment of loan.

Under an assignment of loan, a lender (the assignor) assigns its rights relating to a loan agreement to a new lender (the assignee). Only the assignor's rights under the loan agreement are assigned. The assignor will still have to perform any obligations it has under the facility agreement.

The debtor, the recipient of the loan, must be notified when a debt is assigned. When there is an assignment of a loan, a Notice of Assignment (NOA) is sent out to the debtor informing them that a new party is now responsible for collecting any outstanding amount.

Assignment Of Loan Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.14 5 dex1014.htm ASSIGNMENT OF LOAN DOCUMENTS , Viewed October 21, 2021, View Source on SEC .

Who Helps With Assignment Of Loans?

Lawyers with backgrounds working on assignment of loans work with clients to help. Do you need help with an assignment of loan?

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Ivan B. on ContractsCounsel

I grew up in Beaumont, Texas. I attended Baylor University for college and the The University of Texas School of Law for law school. I gained extensive experience in many areas of transactional law through my former position as corporate counsel at National Western Life Insurance Company and my current position as an Associate at Nance & Simpson, LLP.

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Antonella C.

I am a business transactional & trademark attorney with 15 years experience in the law firm and in-house settings. I am barred in Pennsylvania and New Jersey. I currently own my own practice serving businesses and entrepreneurs with business transactional and IP law.

Amy F. on ContractsCounsel

As a lawyer of 27 years, I have a great deal of experience handling many different types of legal projects. Starting with a simple estate plan or the purchase of a personal residence, and moving all the way to complex estate plans and real estate transactions. I regularly advise small business owners and real estate investors.

Georgie A. on ContractsCounsel

Trusted contracts attorney specializing in real estate and business law. I handle leases, land purchase contracts, investment valuations, cease and desist letters, and operating agreements.

Matthew G. on ContractsCounsel

I am a Berkeley Law 2020 graduate. I have experience working in finance and operations, plaintiff and defense litigation, and have been involved in multiple start-ups.

Jeanilou M. on ContractsCounsel

Jeanilou M.

Jeanilou G.T. Maschhoff has over 20 years of comprehensive business operations, finance, and development experience in addition to being a licensed attorney in California and Hawaii. She zealously works as a Trusted Advisor, Business/Brand Consultant, and Advocate for small businesses, non-profit organizations, and personal brands. She is dedicated to helping female business owners and professionals in the entertainment, beauty, fashion, and wellness industries make their goals a reality. She uses her diversified expertise to provide a holistic approach to addressing business and legal needs. Acting as a trusted advisor and outsourced general counsel, she assists on an array of business and personal matters. Passionate about social justice and assisting underrepresented populations, Jeanilou started her legal career working in the non-profit sector working towards access to justice and gender equity. She continues to assist non-profit organizations in many capacities and actively looks to partner businesses with charitable causes, creating a synergistic effect that benefits not only the organizations involved but our society as a whole. As an early adopter of the virtual practice of law, Jeanilou has been assisting law firms and solo practitioners adjust to the remote delivery of legal services and helping businesses explore Web 3.0.

Christopher L. on ContractsCounsel

Christopher L.

Christopher M. Lapinig is an experienced attorney, admitted to practice in California and New York, with extensive experience in civil litigation at the trial and appellate levels in various areas of the law, including, but not limited to, constitutional law, labor and employment, and consumer protection. He also has experience in immigration law and with administrative wage-and-hour claims. Chris currently works in impact litigation, and he also teaches legal writing at the University of Southern California. Chris also has significant experience in journalism and lay writing; his work has been published in The New York Times, The Atlantic, CNN, and other prominent media outlets. Born and raised in Queens, New York, Chris previously served as a Deputy Attorney General in the Consumer Protection Section at the California Department of Justice. He also served as a Skadden Fellow and Staff Attorney in the Impact Litigation Unit at Asian Americans Advancing Justice – Los Angeles, where his work focused on providing holistic and culturally sensitive legal services to victims and survivors of human trafficking in the Filipino community. At Advancing Justice-LA, Chris also litigated voting rights and immigrant rights cases. At the beginning of his legal career, Chris served as a law clerk to the Honorable Denny Chin of United States Court of Appeals for the Second Circuit and was the first Filipino American Clerk for the Honorable Lorna G. Schofield of United States District Court for the Southern District of New York, the first federal Article III judge of Filipino descent in United States history. Chris was also a Fulbright Research Scholar in the Philippines. A Phi Beta Kappa member, Chris graduated summa cum laude from Yale College and earned a B.A. with Distinction in Linguistics and with Distinction in Ethnicity, Race and Migration. In college, Chris served as President of Kasama: The Filipino Club at Yale, Moderator of the Asian American Students Alliance, and Head Coordinator of the Asian American Cultural Center. Chris returned to Yale for law school and received his J.D. in 2013. In law school, Chris served as the Co-Chair of the Asian Pacific American Law Students Association, the Co-Coordinator of the Critical Race Theory Conference, the inaugural Diversity Editor of the Yale Law Journal, and the Founding Coordinator of the Alliance for Diversity. He was a member of the Worker and Immigrant Rights’ Advocacy Clinic.

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Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Attorney Todd Carney

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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Loan Agreement Template

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loan assignment example

The past six months have been turbulent in the fund finance world. We have seen lenders in the market deal with significant capital constraints, we have seen a small amount of lenders scale back in the fund finance lending market, deciding to deploy capital elsewhere, and we have also seen a large number of new lenders enter into the fund finance market to take advantage of rising interest rates and quality sponsors in need of liquidity. The past week has brought with it unprecedented times, and it of course remains to be seen how the aftermath of the collapse of Silicon Valley Bank and Signature Bank will play out, and specifically what exactly will happen to the fund finance loans held by those lenders. We know this has been a challenging time for our friends and colleagues at these institutions, and we join the broader fund finance community in offering our support. For further information on the impacts of the SVB/Signature FDIC takeover on fund finance transactions, please refer to the articles we published earlier this week  here  and  here , noting that this is a fluid and constantly evolving matter.

In light of the above background, we thought it would be helpful to highlight some of the techniques commonly used by market participants when transferring an existing loan, and some key considerations when doing so.

Assignment by Participant Lender

If a  participant  lender wishes to assign its loan, thereby exiting the facility, this can usually be done by way of execution of an assignment and assumption agreement and compliance with the various other conditions to assignment pursuant to the terms of the underlying loan documents.

In the assignment and assumption agreement, the assigning lender sells and assigns to the assignee lender, and the assignee lender purchases and assumes all of the assignor lender’s rights and obligations under the loan documents.

It is important to thoroughly review the conditions precedent to assignment, including any consents that may be required. Often times the consent of the borrowers is required unless an event of default has occurred and is continuing at the time of such assignment, or unless such assignment is to an existing lender or an affiliate thereof. The new lender must qualify as an eligible assignee under the terms of the loan agreement, and certain persons are usually prohibited therefrom, such as natural persons, defaulting lenders or subsidiaries of the credit parties.

If a defaulting lender is assigning its rights and obligations, typically the parties to such assignment are also required to make certain additional payments to cover all liabilities of the exiting lender.

Upon the effectiveness of the assignment, the assignee lender becomes a party to the loan agreement, and the assigning lender is released from its obligations and ceases to be a lender thereunder, but it continues to be entitled to the benefits of certain indemnification and other rights such as the payment of fees, to the extent such rights relate to the time prior to the assignment.

The administrative agent (the “agent”) is typically required to maintain a register of loans that identifies the name and address of each lender and the amounts of the lenders’ commitments and loan balances, including copies of all assignment and assumption agreements. After assignment, the administrative agent should update this register with the details of the new lender and related loan.

It’s also worth flagging that, in some instances, the new lender may require certain updates to the loan agreement by way of amendment, and/or reliance letters, which provide consent to the new lender to rely on the existing opinions. These are all items that get considered and negotiated when a new lender joins a facility.

Agent Resignation and Appointment; Lender Assignment

If the agent and the assignor lender are one and the same, the parties may wish to effect the loan assignment by removing the existing agent, replacing it with a successor agent, and assigning the loan. The existing lender would also assign its loan to the new lender in the same way that we have detailed above. The steps that are generally followed under this method are set out below, but it is important to note that each deal is different, and it is necessary to follow the terms and satisfy the conditions of the existing loan documents.

(i)  Agent Resignation and Appointment Agreement

Typically the existing agent has a right to resign pursuant to the loan documents, and can do so by way of notice to the parties to such loan agreement, upon receipt of which the majority of lenders will have a right to appoint a successor agent. Similar to a loan assignment, the borrowers usually have consent rights to the successor agent and will therefore need to approve the successor agent, provided that no event of default has occurred and is continuing at the time of such resignation. The parties can document the resignation and appointment by entering into an agent resignation and appointment agreement.

In the LSTA’s Model Credit Agreement Provisions, the successor agent must be a bank with an office in a named city, although sometimes this has been negotiated out of the document if parties didn’t wish to be limited in this respect. The parties will therefore need to ensure that the successor agent meets the criteria set out in the loan agreement.

If the person serving as agent is a defaulting lender, the loan documents typically permit (subject to applicable law) a majority of the lenders (other than the defaulting lender), upon consultation with the borrowers, to remove such agent and appoint a successor. It’s extremely important to obtain legal advice if the parties wish to use this mechanism, since this provision is a little more complex and would be subject to applicable law.  

Upon execution of an agent resignation and appointment agreement, the existing agent will be discharged from its duties and obligations as agent under the loan documents, and the successor agent assumes such duties and obligations. The existing agent also assigns and transfers to the successor agent all of its rights as agent granted or assigned to it under the collateral documents (including security agreements and collateral account pledges) and the successor agent accepts all such rights for its benefit and for the benefit of the other secured parties. The existing agent will typically still hold on to certain indemnification and other rights that relate to the period prior to such resignation or removal.

(ii) Assignment and Assumption Agreement

As detailed in “Assignment by Participant Lender“ above, the parties would enter into an assignment and assumption agreement, and follow the conditions precedent to assignment. See “Assignment by Participant Lender“ for further detail.

(iii) Omnibus Amendment to Loan Documents

The existing credit parties, resigning agent and successor agent would enter into an omnibus amendment to the loan documents, whereby the parties replace all references to the existing agent with the successor agent. It is important to thoroughly review each loan document when preparing the omnibus amendment to ensure compliance with the amendment provisions therein. The notice information will also need to be updated, and the successor agent may have other certain updates that are required to be included in the omnibus amendment.

(iv)  Account Control Agreements

The parties will likely need to amend and restate the existing account control agreements, or enter into new ones, as required by the depositary bank in question and the terms of the applicable control agreements. Sometimes depositary banks permit the account control agreement to be amended and restated, but sometimes they require new ones to be entered into.

(v)  Lien Searches and UCC Filings

The parties will need to run new lien searches, and ensure those are in order, and similarly file UCC-3 amendment filings. The amendment filings will include the successor agent as the secured party.

(vi)  Opinions

It is important to obtain new opinions for the successor agent, since the existing ones will not be addressed thereto and to ensure enforceability and security interest coverage given the amended documents and security filings.

(vii) Certificates and Resolutions

It is also important to obtain new corporate certificates with respect to the credit parties in the transaction and resolutions authorizing the entry into of the transactions contemplated by the omnibus amendment.

(viii)  Investor Notices

Depending on the jurisdiction of the credit parties, new investor notices may have to be sent, notifying the relevant investors that the agent and lender have assigned their interests to the successor agent and lender. It is important to consult with local counsel in order to ascertain whether or not such investor notices may be required. If the deal is an SMA and an investor letter is likely already in place, investor notices would typically be sent regardless of the jurisdiction, in order to notify the investor of such assignment and transfer.

(ix)  Payoff Letter

Sometimes the departing lender will require a payoff letter, confirming that they are exiting the deal upon receipt of the payoff amount, which amount usually represents all obligations due and owing to it pursuant to the loan documents. This is sometimes baked into the omnibus amendment, rather than a stand-alone document.

The above approach can be enticing for new lenders that are looking to also take on the role of agent, which can be lucrative and also provide more insight and control. This technique is also attractive to new lenders when the existing loan documents generally look acceptable and the parties wish to save on fees and expenses that might otherwise be incurred by terminating the existing facility and entering into and negotiating a new one entirely. This method might also be a more attractive option if there are other lenders in the deal and the new lender/agent does not wish to disturb those existing lenders to the extent possible. As mentioned above, every deal is different and has different nuances that will need to be considered and addressed.

Termination of Existing Facility and Entry into of New Facility

This is perhaps the most common way we see loans being transferred to or refinanced by new lenders. Typically, this method is used when a loan is already set to mature, but the existing lender does not wish to renew. The borrower will probably wish to have the new loan commence on or prior to the maturity of the existing loan.

With this approach, the existing loan is terminated and the existing lender is paid off pursuant to a payoff and termination letter; this closes substantially concurrently with the entry into of a new facility. All of the typical requirements associated with a new deal are entered into, which we won’t get into for the purposes of this article; however, it is important to note that the new lender will also need to make sure that UCC-3 termination filings are filed immediately prior to the UCC-1 filings being filed, in order to ensure its priority with respect to the collateral. The existing account control agreements will also need to be terminated and new ones entered into.

The parties to the “new loan” may wish to use the existing loan agreement as precedent for the transaction, since the material issues will likely already have been addressed; however, this depends on the appetite of the new lender, depending on how those existing loan documents were drafted and depending on how old they might be; in some instances, it may make more sense to start with a new lender’s form documents.

Other considerations, such as outstanding letters of credit, will need to be addressed too, depending on how the existing facility was set up. For example, the new lender may be asked to provide a loan to the borrower in order to cash collateralize its existing letter(s) of credit.

The above methods, while used in the fund finance market, are high-level overviews only. It is important to seek guidance from counsel and address the particular nuances of the deal at hand.

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Updated November 13, 2023 Written by Sara Hostelley | Reviewed by Brooke Davis

A loan agreement is a legally binding contract between a lender and a borrower that a court can enforce if one party doesn’t follow the arrangement. It establishes how much money the lender is loaning and sets other terms, including the repayment schedule and interest.

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You should use a written loan agreement whenever you lend or borrow money. Here are some situations where you may need to create this document:

  • Starting a business with a capital loan [1]
  • Purchasing land or a home with a real estate loan
  • Investing in a college education or repaying a student loan
  • Buying a new car or boat
  • Getting a paycheck advance from an employer
  • Helping a friend or family member with a personal loan

When making a loan agreement contract between family members, you should be aware that there can be tax implications. For example, if you lend money without interest, the IRS may charge you tax because it would be below the minimum interest rate required for family loans. This amount is the Applicable Federal Rate (AFR) [2] .

Also, if you’re borrowing money from family or friends and don’t have to repay the loan, the IRS will consider this transaction a gift and charge you income tax [3] .

If you see an exorbitantly high interest rate on a potential loan agreement, you shouldn’t sign it without serious consideration. You may be a victim of a loan shark, which is a lender who preys on individuals and charges the highest legal interest rate possible.

Step 1 – Check Your Credit Score

Your credit score indicates how likely you are to repay a loan. Lenders consider this metric when assessing your loan application.

The higher your credit score, the better chance a lender will want to loan to you. You can obtain your credit score from one of the three major credit bureaus, which are Experian , Transunion , and Equifax .

Once you learn your current credit score, you can understand which interest rates you may qualify for.

Step 2 – Compare Lenders

Shop around for the best personal loan option. Research and compare lenders based on interest rates, fees, repayment terms, and customer reviews.

You have several options to find personal loans:

  • Banks could be the best option if you have a good to excellent credit score. They offer low interest rates, few fees, and flexible repayment terms.
  • Credit unions offer loans to their members. They tend to have lower interest rates and fees and can’t charge more than 18% APR (annual percentage rate) on personal loans [4] .
  • Online lenders let you prequalify, apply for, and receive personal loans online, but they have higher APRs and fees than banks and credit unions.

Consider obtaining a loan from a family member or friend who has extra money to lend. Even if you know the lender well, it’s still a good idea to get a personal loan agreement in writing.

Step 3 – Gather Necessary Documents

Lenders may request several documents to verify your information. Gather them in advance so you can present them when lenders request them.

Examples of these documents include proof of identity (like a driver’s license or an affidavit of identity ), proof of income , bank statements, and rental or mortgage agreements.

Step 4 – Get Prequalified for a Loan

Many lenders offer a prequalification process involving a soft credit check that estimates the loan amount and interest rate you might qualify for. Thanks to prequalification, you can preview the potential offers you may get from lenders and narrow them down based on potential interest rates, fees, terms, and amounts.

Note that the prequalification process doesn’t guarantee you’ll get a loan. It also doesn’t require you to accept one.

Step 5 – Start the Application Process

If you’re satisfied with the prequalification terms, pick one that matches your needs and proceed with the formal loan application. Complete the lender’s application form with accurate information, finalize the documents, and accept the terms.

Step 6 – Accept the Loan

If you receive loan offers after applying, review them carefully. Pay attention to the loan amount, interest rate, repayment term, and associated fees, and read and understand the fine print. You can accept the offer and sign the loan agreement if all the details meet your needs.

While most jurisdictions don’t require witnesses to legitimize this document, you may consider getting a notary public to sign it. A notary public will ensure all parties sign the document as themselves and without coercion.

Follow these steps to notarize a loan agreement:

Step 1 – Find a Notary Public

You can find a certified notary public at a local accountant’s office, lawyer’s office, bank, or public library. You may also use free online services to connect with a notary public who isn’t in your area.

Schedule a meeting with them. The other party (whether they’re the borrower or lender) can be present, but they may also have their signature notarized at a different time.

Step 2 – Meet With the Notary Public

Meet with the notary public. Present a valid form of government-issued ID so they can confirm your identity.

Step 3 – Sign the Agreement

Sign the agreement in front of the notary public. Once you sign, they’ll add their seal to your document.

Step 4 – Pay the Associated Fee

Pay the nominal fee for the notary public’s services. Depending on where you live, you may expect to pay between a couple dollars and $10.

A loan contract contains basic details, including the principal amount and interest. Explore some other terms and conditions that you can include within this document:

Payback Options

This document can outline the desired payback option. For example, a lender may want the borrower to pay:

  • In full on a certain date
  • In installments of interest only (with the principal due at a later date)
  • In installments of the principal and interest

Assignment refers to letting a lender sell their right to collect payments from a borrower. This option may be useful if the lender no longer wants to collect payments from the borrower.

A guaranty provision states that a cosigner will become responsible for the loan if the original borrower fails to repay the entire amount.


An acceleration clause explains whether the lender can increase the repayment date or make the borrower repay the loan immediately. Possible triggers for acceleration include:

  • The borrower becomes bankrupt.
  • The borrower fails to follow the agreed-upon payment schedule.
  • The borrower wants to pay off the note early.
  • The borrower sells off a significant or material portion of their assets.

An amendments clause can outline how either party can alter the original agreement.

A collateral provision is essential for a secured loan, as it defines what property the lender can keep if the borrower defaults.

A prepayment clause determines if the borrower can pay off the loan and interest early. If the lender permits, this clause may allow the borrower to receive a discount for early payment.

Late Charges

A late charges clause states that the borrower is responsible for paying penalty fees if they make late payments.

Joint and Several Liabilities

Joint and several liabilities state that all borrowers are individually responsible for the total loan amount.

Maturity Date

The maturity date defines when the borrower should repay the full amount.

Step 1 – Name the Parties

This agreement should detail the lender’s and borrower’s full legal names.

loan agreement borrower and lender details

Step 2 – Write Down the Loan Amount

Provide the amount the borrower will be loaning from the lender. This amount is the principal sum. It doesn’t account for the total amount, including accrued interest.

loan agreement loan amount details

Step 3 – Specify Repayment Details

This section is where you must provide the details of the borrower’s loan repayment. The options you choose will have to be mutually agreed upon. You can choose whether the borrower will repay the loan in regular payments or at once.

  • Regular Payments: The borrower repays the lender in a set number of payments over a specific period.
  • Single Payment: The borrower repays the lender all at once by the date specified by the lender OR “on-demand” by the lender. With a “Due on Demand” payment option, the borrower repays the loan upon the lender’s demand.

If you choose regular payments, you must specify the repayment schedule, which can be monthly, quarterly, semi-annual, or annual installments.

loan agreement repayment of loan details

Step 4 – Choose How the Loan Will Be Secured (Optional)

If you want the loan secured, you can include the property the borrower has put up for collateral. Make sure to provide as many relevant details as possible. Both parties must mutually agree upon this collateral for it to be legally valid in court.

loan agreement security details

Step 5 – Provide a Guarantor (Optional)

A cosigner or guarantor is optional and protects the lender if the borrower defaults on the agreement. You may require a cosigner if the borrower is in questionable financial standing. The cosigner is someone who jointly signs the agreement with the borrower.

If the borrower defaults and cannot pay back the amount in full, the cosigner is responsible for paying you back the due amount. The cosigner is usually someone in good financial standing or has excellent credit.

loan agreement guarantors and co-signers

Step 6 – Specify an Interest Rate

You should include the interest rate you will be charging the borrower in a percentage. This interest rate will apply to the principal amount of the loan, and the borrower must agree to this rate.

loan agreement interest details

Step 7 – Include Late Fees (Optional)

As a lender, you can charge late fees if the borrower does not meet a payment in time. Including a late fee can motivate the borrower to make payments on the agreed dates.

loan agreement late fee details

Step 8 – Determine Options for Prepayment

You can include whether penalties or discounts will apply if the borrower decides to pay the loan amount ahead of schedule. Alternatively, you can explicitly state that the agreement does not allow prepayment of the loan.

A penalty can prevent the borrower from paying the loan early and encourage long-term payments. The loan would then accrue more interest, which can be a favorable arrangement for the lender.

loan agreement prepayment details

Step 9 – Include Provisions for a Default

When the borrower cannot repay the loan as the loan agreement details, the borrower has entered into default. It would be best to clarify how the borrower will default in the document. An agreement can say missing one payment causes a default, but a lender may choose to be more lenient.

A default can give you the legal right to accelerate payment. In this scenario, you can make the total loan amount due immediately.

loan agreement acceleration details

Step 10 – Add in Relevant Terms

Further terms make up the remainder of the agreement and serve to protect the rights of both parties, and they include any remaining provisions such as:

  • The legal right of the lender to enforce the terms of the agreement
  • The costs and expenses associated with taking the case to court
  • The transferability of the agreement
  • The capability of alterations to part of or the entire agreement

Step 11 – Specify How You Would Like To Communicate

You can establish communication methods so both parties are on the same page. This preparation can prevent either party from claiming they didn’t receive a notice.

loan agreement communication preferences

Step 12 – Include the Governing Law

Indicate your resident state in the agreement so both parties know which jurisdiction’s laws they must follow.

loan agreement governing law details

Step 13 – Determine the Resolution Method for Disputes

Detail the procedure for how both parties can resolve disagreements. Choose from several options, including court litigation, mediation, and arbitration.

Pursuing court litigation will mean the party who lost the case must pay the other party any costs and fees related to the court process.

loan agreement disputes details

Step 14 – Include All Relevant Signatures

All involved parties in the agreement, including personal guarantors and cosigners, must sign the document.

loan agreement signatures

Download a free loan agreement template as a PDF or Word file below.

business loan agreement

What’s the difference between a loan agreement and a promissory note?

A loan agreement and a promissory note are legal documents individuals use when borrowing money from another party. However, promissory notes tend to be shorter and more straightforward. They focus on the borrower’s pledge to repay and contain basic elements like the parties’ names, the loan amount, and the terms.

Loa agreements are more comprehensive since they outline the loan’s terms and conditions in greater detail. They often give both parties more protections, including borrower representations, warranties, and covenants.

For more detailed information, read our article on the differences between a loan agreement and a promissory note .

Can you cancel a loan agreement?

You can cancel this agreement in certain instances. Refer to the original document for termination conditions. You may also be able to cancel the loan if both parties agree to it or if you’re within your jurisdiction’s cancellation period for your specific loan type.

Can I write a loan agreement with a family member?

Yes. Consider writing this agreement when borrowing money from or lending to a family member. This agreement can help keep matters objective if you disagree about the loan’s terms later.

What does it mean to consolidate your loans?

Consolidating your loans involves obtaining one sizable loan to pay off all your loans. This way, you only have to make one payment each month. Consolidation may be a reasonable option if you can secure a loan with a low interest rate.

Legal Templates uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial guidelines to learn more about how we keep our content accurate, reliable and trustworthy.

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Loan Participation Vs Assignment

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Sub-participation is a form of loan participation in which a lender shares its risk with a second party. This type of loan participation does not change the documentation of the loan. This type of loan participation can also include future amounts for loans that have not yet been fully disbursed, such as a revolving credit facility.

The legality of sub-participation is dependent on the conditions of the loan agreement. In general, a loan participant cannot enforce the loan or proceed against the collateral on their own. Furthermore, the borrower may not even be aware that the loan participant is involved. However, the seller of the participation retains the right to enforce or compromise the loan, as well as to amend it without the consent of the participant.

As for drafting sub-participation agreements, there are many ways to do so. But it is important to include at least the following provisions: The term of the agreement, the rate of interest, and the repurchase provisions. These provisions should be included in the sub-participation or assignment agreement.

Assignment and sub-participation are standard terms in inter-bank transactions. We will examine the purposes of the loan participation and assignment agreements, as well as the terms of the transaction. While they are essentially interchangeable, they are fundamentally different.

Loan participation and assignment are both ways to transfer ownership of a loan. Assigning a loan to a third party or sub-assigning it to yourself is a common way to transfer the loan.

The terms “loan participation” and “assignment” are often used in the banking industry. Both terms refer to the transfer of a loan’s rights and payments between two financial institutions. We’ll look at what each term means and how they differ from each other.

Loan participation has long been a common form of loan transfer. Its advantages over other loan transfer methods include the ability to diversify a portfolio and limit risk. It also eliminates the need for loan servicing. However, this option can be problematic when it differs from underlying loans. For this reason, it’s important to structure loan participation carefully.

Whether a loan is a participation or an assignment depends on a variety of factors. The percentage of loan ownership, relationship with the other financial institution, and confidence in the other party are all important considerations. However, the basic difference between participation and assignment is that the former involves the original lender continuing to manage the loan while the latter takes on the responsibility of doing so.

As a rule, loan participation is a good option if the original lender does not want to keep the title of the loan. It allows the borrower to avoid the costs associated with the loan and is more attractive for borrowers. In addition, loan participation arrangements can be more flexible than outright assignments. However, it’s important to make sure that the arrangement you enter into is formal. This will prevent any confusion or conflict down the road.


Understanding the differences between loan participation and syndication is important for lenders. Understanding these two options can help them find the best solutions for their lending needs. Syndication is a common type of lending program where lenders pool their loans together to reduce the risks of defaults. Loan participation programs can be more complex and require due diligence to be effective.

Syndicated lending allows lenders to access the expertise and business relationships of their fellow lenders while maximizing their exposure to deal flow. However, lenders who join a syndicated lending arrangement often give up some of their independence and flexibility to take unilateral action. In addition, these arrangements often involve the involvement of legal counsel, which can also be important.

A loan participation arrangement is a group of lenders coming together to fund a large loan. A lead bank underwrites the loan and sells portions of it to other financial institutions. Loan syndication, on the other hand, is an arrangement whereby multiple financial institutions pool their money together and make one large loan. In this type of arrangement, the original lender transfers the rights and obligations to the purchasing financial institution. The risk is then shared among the participating lenders, allowing them to share in the interest and the risks of the loan’s default.

A syndication contract can be structured in as many tranches as necessary to meet the borrowing needs of a customer. The underlying contract will contain a commitment contract that specifies the ratio of participation among the participants. Each tranche will have a borrower, which will be a common participant or may be different. The contract will require that each participant fulfill their commitments before the scheduled due dates.

Loan participation and assignment are standard transactions between banks. They are similar in some respects but have different purposes. 

There are many types of loan participation agreements. Some involve a full assignment, while others are a sub-participation. If you are involved in loan participation or assignment, you need to understand which type of agreement applies to your situation. There are several types of loan participation agreements, including sub-participation agreements, undisclosed agencies, and assignments.

Sub-participation agreements are typically used to assign part of the loan amount to a new lender, and the loan documentation remains unchanged. In addition, these types of agreements include future amounts, which may be provided as part of a revolving credit facility or a portion of a loan that hasn’t been fully disbursed.

Loan participation is a popular option for lenders to limit their exposure to borrowers. Lenders may sell a portion of the loan to an investor or sell a portion of their interest to another party. While the transfer of a loan portion does not always require the consent of the transferor, lenders must consider participating interest guidelines and the applicable rules.

How Do Variables Affect Bank Loan Sales?

How Do Variables Affect Bank Loan Sales?

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  • Practical Law

Assignment of loan

Practical law uk standard document 9-500-4767  (approx. 31 pages).

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Assignment: Definition in Finance, How It Works, and Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

loan assignment example

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

loan assignment example

What Is an Assignment?

Assignment most often refers to one of two definitions in the financial world:

  • The transfer of an individual's rights or property to another person or business. This concept exists in a variety of business transactions and is often spelled out contractually.
  • In trading, assignment occurs when an option contract is exercised. The owner of the contract exercises the contract and assigns the option writer to an obligation to complete the requirements of the contract.

Key Takeaways

  • Assignment is a transfer of rights or property from one party to another.
  • Options assignments occur when option buyers exercise their rights to a position in a security.
  • Other examples of assignments can be found in wages, mortgages, and leases.

Uses For Assignments

Assignment refers to the transfer of some or all property rights and obligations associated with an asset, property, contract, or other asset of value. to another entity through a written agreement.

Assignment rights happen every day in many different situations. A payee, like a utility or a merchant, assigns the right to collect payment from a written check to a bank. A merchant can assign the funds from a line of credit to a manufacturing third party that makes a product that the merchant will eventually sell. A trademark owner can transfer, sell, or give another person interest in the trademark or logo. A homeowner who sells their house assigns the deed to the new buyer.

To be effective, an assignment must involve parties with legal capacity, consideration, consent, and legality of the object.

A wage assignment is a forced payment of an obligation by automatic withholding from an employee’s pay. Courts issue wage assignments for people late with child or spousal support, taxes, loans, or other obligations. Money is automatically subtracted from a worker's paycheck without consent if they have a history of nonpayment. For example, a person delinquent on $100 monthly loan payments has a wage assignment deducting the money from their paycheck and sent to the lender. Wage assignments are helpful in paying back long-term debts.

Another instance can be found in a mortgage assignment. This is where a mortgage deed gives a lender interest in a mortgaged property in return for payments received. Lenders often sell mortgages to third parties, such as other lenders. A mortgage assignment document clarifies the assignment of contract and instructs the borrower in making future mortgage payments, and potentially modifies the mortgage terms.

A final example involves a lease assignment. This benefits a relocating tenant wanting to end a lease early or a landlord looking for rent payments to pay creditors. Once the new tenant signs the lease, taking over responsibility for rent payments and other obligations, the previous tenant is released from those responsibilities. In a separate lease assignment, a landlord agrees to pay a creditor through an assignment of rent due under rental property leases. The agreement is used to pay a mortgage lender if the landlord defaults on the loan or files for bankruptcy . Any rental income would then be paid directly to the lender.

Options Assignment

Options can be assigned when a buyer decides to exercise their right to buy (or sell) stock at a particular strike price . The corresponding seller of the option is not determined when a buyer opens an option trade, but only at the time that an option holder decides to exercise their right to buy stock. So an option seller with open positions is matched with the exercising buyer via automated lottery. The randomly selected seller is then assigned to fulfill the buyer's rights. This is known as an option assignment.

Once assigned, the writer (seller) of the option will have the obligation to sell (if a call option ) or buy (if a put option ) the designated number of shares of stock at the agreed-upon price (the strike price). For instance, if the writer sold calls they would be obligated to sell the stock, and the process is often referred to as having the stock called away . For puts, the buyer of the option sells stock (puts stock shares) to the writer in the form of a short-sold position.

Suppose a trader owns 100 call options on company ABC's stock with a strike price of $10 per share. The stock is now trading at $30 and ABC is due to pay a dividend shortly. As a result, the trader exercises the options early and receives 10,000 shares of ABC paid at $10. At the same time, the other side of the long call (the short call) is assigned the contract and must deliver the shares to the long.

loan assignment example

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loan assignment example

Loan Assignment Agreement Sample: Free Template & Examples

Importance loan assignment sample.

Loan assignment essential loan process, outline terms conditions loan assignment. A loan assignment agreement sample serves as a template for creating a legally binding document that clearly spells out the rights and obligations of all parties involved.

As a legal document, loan assignment agreement samples can vary in content and structure, but they generally include important information such as:

Having a well-drafted loan assignment agreement sample can help prevent misunderstandings and disputes between the parties, and can ultimately save time and money in the long run.

Case Study: The Impact of a Loan Assignment Agreement Sample

In a recent case study, a small business owner obtained a loan from a traditional bank, but due to unexpected financial difficulties, they were unable to repay the loan. The bank decided to assign the loan to a third-party debt collection agency, and without a clear loan assignment agreement in place, the process became complicated and contentious.

After months of legal battles, the small business owner and the debt collection agency finally reached a settlement, but the entire ordeal could have been avoided with a properly drafted loan assignment agreement sample.

Sample Loan Assignment Agreement

Below is a simplified example of a loan assignment agreement:

Overall, a loan assignment agreement sample is a crucial tool for ensuring clarity and legal protection in loan assignments. Whether you are a lender, borrower, or assignee, having a well-crafted agreement in place can help safeguard your interests and provide peace of mind.

Loan Assignment Agreement Sample

This Loan Assignment Agreement (the “Agreement”) entered [Insert Date], and between [Lender’s Name Address] (the “Lender”) and [Borrower’s Name Address] (the “Borrower”).

1. Assignment Loan

2. representations and warranties.

The Lender represents warrants full power authority assign Loan Borrower, restrictions limitations ability do so. The Borrower represents warrants capacity authority accept assignment Loan fulfill obligations original loan agreement.

3. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the state of [Insert State], without giving effect to any choice of law or conflict of law rules or provisions.

4. Miscellaneous

This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior negotiations, understandings, and agreements. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Top 10 Legal Questions about Loan Assignment Agreement Sample


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    LOAN ASSIGNMENT AGREEMENT I. PARTIES: The parties to this Loan Assignment Agreement are as follows: Technology Spin Off Systems, LLC, a New York limited liability company (hereinafter referred to as "Assignee"); and DCI USA, INC., a Delaware... Contract Type Loan Assignment Agreement Filed September 22nd, 2005 Company Dci Usa, Inc Industry


    Related to LOAN ASSIGNMENT AGREEMENT. Assignment Agreements Each Bank may, from time to time, with the consent of the Borrower and Agent (which will not in any instance be unreasonably withheld), sell or assign to other banking institutions rated "B" or better by Thomxxxx Xxxk Watch Service a pro rata part of all of the indebtedness evidenced by the Notes then owed by it together with an ...

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    Sub-participation Sub-participation is a form of loan participation in which a lender shares its risk with a second party. This type of loan participation does not change the documentation of the loan.

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