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: six pieces of information, both signatures, and no lawyer or notary required. Here are the exact pieces it needs, the Canadian rules that trip up DIY drafts, and the fastest way to make one you can both 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.
Plan the paper trail as well as the repayment dates. This guide to family-loan repayment records shows what to keep for e-Transfers, cash payments and the final payoff.
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 annual percentage rate (APR) must not exceed the 35% criminal cap (fees count as interest), 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 — here’s what one actually adds.
- Age of majority. Both people must be the age of majority where they live (18 in Alberta, Manitoba, Ontario, PEI, Quebec and Saskatchewan; 19 in BC, New Brunswick, Newfoundland and Labrador, Nova Scotia and the territories).
- The 35% interest cap. Charging interest at an annual percentage rate (APR) above 35% is a crime under the Criminal Code (s.347), whatever the amount — and fees and penalties count as interest.
- Annual-rate rule. Under the Interest Act, if you state interest per month (or for any period under a year) without the equivalent yearly rate, you can only recover 5% a year.
- The limitation clock. Each province sets a deadline to sue — two years from a missed payment in most provinces, six years in PEI, Newfoundland and Labrador and the territories — and a signed written acknowledgment of the debt or a part payment restarts it. 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 are behind many of the 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 →Common questions
Does a family loan agreement need to be notarized in Canada?
No. A family loan agreement does not need to be notarized to be valid in Canada. It needs the essential terms and both parties' signatures. A witness or notary is optional and can add evidence of who signed, but it isn't required for the contract to be binding — and electronic signatures are valid too.
Can I write my own family loan agreement?
Yes. You can write your own family loan agreement as long as it clearly identifies both people, the amount, any interest (stated as a yearly rate) and the repayment terms, and you both sign it. A structured tool helps make sure you don't miss the clauses that make it enforceable in Canada, such as the annual-rate wording and the governing province.
Do we both have to sign a family loan agreement?
Yes — that's what makes it an agreement rather than a one-sided IOU. When both people sign, the lender's side of the deal (the amount advanced, the schedule, the grace period) is on the record too. Date it, keep a copy each, and keep proof the money moved, such as the e-transfer record.
How much interest can I charge on a family loan?
Anything from zero up to 35% a year, measured as an annual percentage rate (APR); above that is a criminal rate under the Criminal Code, and fees count as interest. Many families charge nothing. If income splitting is the goal, charge at least the CRA prescribed rate (3% for October–December 2026) and pay the interest by January 30 each year.
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.