Loan Agreement in Canada: Template and Key Clauses (2026)

A loan agreement in Canada records the terms on which one party lends money to another and the borrower agrees to repay it. It is used for everything from a loan between family members or shareholders to a business line of credit. A clear agreement protects both sides: the lender knows how and when it will be repaid and what happens on default, and the borrower knows exactly what it owes and under what conditions. Even a friendly loan is far safer in writing. This is general information, not legal advice. Interest, disclosure and consumer-credit rules vary by province and by the type of lender, so confirm the current position before relying on a clause. ## Which rules shape a Canadian loan Several layers of law can apply. The federal Interest Act sets some baseline rules, including how interest must be disclosed, and the Criminal Code caps the effective annual interest rate that may be charged. Provincial consumer-protection and cost-of-credit legislation adds disclosure duties for consumer loans, and regulated lenders face further rules. For a simple business or private loan the agreement itself carries most of the weight, but the interest rate and its disclosure still have to stay within the law. <!-- [VERIFY] current criminal interest-rate limit in the Criminal Code before citing a figure or percentage --> ## A clause by clause skeleton Use this as a structure to adapt, not a finished document. ``` LOAN AGREEMENT Parties: [Lender] and [Borrower] Date: [date] 1. THE LOAN The Lender lends [principal amount] to the Borrower on the terms below. 2. PURPOSE The loan is for [purpose], and the Borrower will use it only for that. 3. INTEREST Interest is [rate] per year, calculated [method], disclosed as required by law. [Or: the loan is interest free.] 4. REPAYMENT The Borrower repays by [instalments / on demand / on a fixed maturity date], as set out in Schedule 1. 5. PREPAYMENT The Borrower may repay early [without penalty / with a stated fee]. 6. SECURITY [Unsecured] OR secured by [a general security agreement / a guarantee / a mortgage / specific collateral], documented separately. 7. REPRESENTATIONS The Borrower confirms it may lawfully borrow and the information given is accurate. 8. COVENANTS The Borrower will [pay on time, provide information, keep insurance, not grant other security over the collateral], as agreed. 9. EVENTS OF DEFAULT Default includes missed payment, insolvency, breach of covenant and [others]. On default the Lender may demand the full balance. 10. COSTS The Borrower pays the Lender's reasonable enforcement costs, to the extent the law allows. 11. GOVERNING LAW Governed by the laws of [province] and Canada. Schedule 1: Repayment schedule

- **Disclosure.** Consumer loans carry extra cost-of-credit disclosure duties under provincial law; business loans are lighter but the Interest Act still applies.
- **Registering security.** To be effective against third parties, security over business assets is usually registered under the province's personal-property security regime.
- **Guarantees.** A guarantee from an individual may need independent legal advice to be enforceable, especially in some provinces. ## Common mistakes to avoid - No written agreement for a loan between family, friends or a shareholder and the company, leaving the terms to memory.
- An interest rate expressed in a way that breaches the Interest Act disclosure rules or exceeds the criminal cap.
- Silence on prepayment, so it is unclear whether the borrower can repay early and at what cost.
- Taking security but never registering it, so the lender loses priority to later creditors.
- A vague default clause that does not clearly let the lender call in the loan. ## Keeping loans and their security together A loan agreement does not stand alone. It is tied to a repayment schedule, often to a guarantee or a security agreement, and to covenants that have to be monitored over the life of the loan. When these documents and their key dates live in separate files, a lender can miss a covenant breach or a borrower can lose track of what is still owed. Drafting a loan agreement, reviewing an interest or default clause, editing a repayment schedule in plain language and holding the agreement with its security documents and dates in one view can live in a single AI workspace tuned to how your company contracts. Adira is built around that workspace, running on Claude, with per-seat pricing shown up front and a 7-day trial, India-first and built to work across jurisdictions. You can read more at [adiralaw.com](https://adiralaw.com). For a simple one-off loan the skeleton above is enough on its own. The useful point is that a loan is easier to manage when the agreement, its security and its schedule stay together.