A Canadian family loan agreement needs both parties' names, the amount, the repayment schedule, the interest rate stated per annum (0% is fine), default terms, the governing province, and signatures — e-signatures are valid. This guide walks through each clause and the federal rules (the 35% criminal rate and Interest Act s. 4) that trip up DIY drafts.
A good family loan agreement is short, plain, and complete. Here are the exact pieces it needs, the Canadian rules that matter, and the fastest way to make one both people can sign.
You don't need legal jargon to write a family loan agreement that holds up. You need to be clear and complete — because the whole point is to remove the ambiguity that turns a kind gesture into a dispute. Below is everything a Canadian family loan agreement should contain, in order, followed by the legal rules to keep in mind.
The 6 steps to writing it
Identify both people
Full legal names and home addresses of the lender and the borrower. This fixes exactly who owes whom — important if it ever needs to be enforced.
State the loan amount and date
The exact principal in Canadian dollars (e.g. "$5,000 CAD"), and the date it's advanced and how (e.g. Interac e-Transfer). Recording that the money actually moved, as a loan, helps defeat any later "it was a gift" claim.
Set the interest — or state interest-free
Either state a clear annual interest rate, or state plainly that the loan is interest-free. If you charge interest, two Canadian rules apply: the effective rate must stay under the 35% criminal cap, and the rate must be expressed as an annual rate. Many families lend interest-free or use the low CRA prescribed rate to avoid tax complications.
Spell out repayment
How and when. Lump sum by a date, or regular installments (e.g. "$200 per month on the 1st"). Always include a clear final repayment date — it removes doubt and starts the limitation clock cleanly. Want to model the numbers? Use the loan calculator.
Say what happens with missed and early payments
State a short grace period and that, if a payment stays unpaid, the lender may call the full balance due. State whether the borrower can repay early (usually allowed, no penalty). These two clauses are what make the agreement feel real rather than optional.
Choose the governing province and both sign
Name the province whose law governs (usually the lender's). Then both people sign and date it — a handwritten or a valid electronic signature. An unsigned agreement is just a draft.
What to put in — at a glance
Parties (names + addresses) · loan amount + date advanced · interest rate or "interest-free" · repayment schedule + final date · missed-payment terms · early-repayment terms · governing province · both signatures + date.
The Canadian rules that matter
- It doesn't need a lawyer or notary. A family loan agreement is valid in Canada with the essential terms and both signatures. A witness or notary is optional.
- Age of majority. Both people must be the age of majority in their province (18 in most; 19 in BC, Nova Scotia and a few others).
- The 35% interest cap. Any interest must keep the effective annual rate below the federal criminal cap (Criminal Code s.347).
- Annual-rate rule. Under the Interest Act, if you charge interest it must be stated as a yearly rate, or a default rate can apply.
- The limitation clock. Each province sets a deadline to sue (commonly two years from when the debt was due or last acknowledged). A clear repayment date makes that timeline certain.
- Quebec is different. Quebec's civil-law system has its own rules; templates written for common-law provinces may not fit.
The most common mistake
Leaving out the repayment date and the "is this a loan or a gift" language. Those two gaps cause the majority of family-loan disputes that end up in court. Spending one extra sentence on each is the cheapest protection you'll ever buy. See real Canadian cases where the paperwork decided everything →
Write it yourself, or let a tool do it right
You can absolutely draft this in a document yourself using the checklist above. The risk of doing it by hand is missing one of the clauses that makes it enforceable in Canada — the annual-rate wording, the governing-law clause, the right age-of-majority — or ending up with a US template that doesn't fit Canadian rules.
That's exactly what LendRight is for: it asks you a few plain questions and assembles a complete agreement built for Canadian law with every clause in place, then lets both people sign it digitally from their phones — no printing, no lawyer to book.
Once it's written and signed, keeping it provably unchanged matters too. A LendRight agreement is sealed with a SHA-256 fingerprint at signing — see document integrity and the SHA-256 seal.
Create your family loan agreement now
Answer a few questions and get a clear, signed agreement built for Canadian law in about four minutes. Free to draft.
Create my loan agreement →This article is general information about Canadian law, not legal advice. Rules vary by province and Quebec differs. For a large or complex loan, consult a licensed lawyer in your province.
We write plain-language guides on lending between family and friends in Canada, reviewed against current provincial and CRA rules. LendRight is not a law firm — this is general information, not legal advice.