Loanwords are a typical by-product of a language contact situation. In the realm of loanword phonology many studies have captured phonological variation using Optimality Theory (OT) as a framework (Yip, 1993; Jacobs & Gussenhoven, 2000; Ito & Mester, 1995; Davidson & Noyer, 1996; Broselow, 2004; Kenstowicz & Atiwong, 2006, inter alia). Other studies have focused on phonological variation within and among the speakers of the same speech community (or dialect) by using OT (Anttila, 1995, 1997; Anttila & Cho, 1998 ; Auger, 2001; Nagy & Reynolds, 1997; Zubritskaya, 1997). However, few of these studies have either modelled phonological variation in loanword adaptation patterns at the suprasegmental level (involving syllable phonotactics or stress) using OT or exploited the possibilities that OT offers for exploring the factorial typology of variation in loanword adaptation, to predict possible loanword grammars. The current study focuses on loanword adaptation patterns from English into Mirpur Pahari (MP) based on generalisations derived from native speaker intuitions (for speakers in Pakistan) and elicited data (for a UK-speaker). The adaptation patterns at suprasegmental level in MP loanwords are found to undergo different modifications in different MP speaker groups (namely, Monolinguals (ML), Late-bilingual(LB) and Early-bilingual (EB)); - some adaptations reflect aspects of MP phonology, but others have no correlate in MP phonology. The central tenet of this thesis is that variations in loanword adaptation patterns can by modelled by using OT (Prince and Smolensky, 1993/2004) as a main framework. I argue that OT can be used to analyse inter-speaker variation in loanwords by reranking constraints. Intra-speaker variation can be captured by using Partially Ordered Constraints (POC) as proposed by Anttila (1997). A factorial typology analysis of the range of MP loanwords grammars is presented using OTSoft, as a by-product of checking constraint rankings. The factorial typology strongly suggests an influence of orthography in constraining variation in loanword adaptation. Overall, this thesis demonstrates that investigation of loanword adaptation in a complex language context situation - like that of MP - must take both internal and external factors into account.