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Loan Agreement Template
A loan agreement records the terms on which one party lends money to another and is the single most important document if repayment ever becomes disputed. Our free Canadian template covers principal, interest, repayment schedule, default and collateral, and is drafted to comply with the federal Interest Act and provincial secured transactions legislation.
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LOAN AGREEMENT
Personal Loan — Province Of Ontario, Canada
LENDER
First Capital Finance Inc.
100 King Street West, Suite 3500, Toronto, ON M5X 1A9
Phone: +1 (416) 555-0100
Email: finance@firstcapital.ca
Phone: +1 (416) 555-0100
Email: finance@firstcapital.ca
BORROWER
James M. Patel
250 Yonge Street, Unit 404, Toronto, ON M5B 2L7
Phone: +1 (416) 555-0200
Email: james.patel@email.com
Phone: +1 (416) 555-0200
Email: james.patel@email.com
Principal: 50,000.00 CAD
6.5% Simple · Unsecured
This Loan Agreement (this "Agreement") is entered into as of April 1, 2026 by and between First Capital Finance Inc. (the "Lender") and James M. Patel (the "Borrower"). The Lender agrees to lend and the Borrower agrees to borrow the sum set forth herein, subject to the terms and conditions of this Agreement.
1.
LOAN AMOUNT AND PURPOSE
The Lender agrees to lend to the Borrower the principal sum of 50,000.00 CAD (the "Loan"). The Borrower shall use the Loan proceeds solely for the following purpose: Home renovation and kitchen remodeling. The Borrower shall not apply the Loan proceeds to any other purpose without the prior written consent of the Lender.
2.
INTEREST
Interest shall accrue on the outstanding principal balance at the rate of 6.5% per annum, calculated on a simple basis. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. The effective annual interest rate shall in no event exceed the criminal rate set out in s. 347 of the Criminal Code (Canada).
3.
TERM
This Agreement shall commence on April 1, 2026 and shall continue until the Maturity Date of April 1, 2029, unless earlier terminated in accordance with the terms hereof. All outstanding principal and accrued and unpaid interest shall be due and payable in full on the Maturity Date.
4.
REPAYMENT
The Borrower shall make monthly payments of 1,600.00 CAD each, commencing on the first payment date following the Loan Date, until the Maturity Date, at which time all remaining principal and accrued interest shall be due and payable in full.
5.
UNSECURED OBLIGATION
This Loan is an unsecured obligation of the Borrower. No collateral or security has been pledged in connection with this Agreement. The Borrower acknowledges that no collateral has been granted to the Lender.
6.
PREPAYMENT
The Borrower may prepay this Loan in whole or in part at any time without premium or penalty. Any prepayment shall be applied first to accrued and unpaid interest and then to the outstanding principal balance.
7.
DEFAULT
The Borrower shall be in default if: (a) the Borrower fails to make any payment within 15 days of its due date; (b) the Borrower breaches any material term of this Agreement; (c) the Borrower becomes insolvent or is subject to proceedings under the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3; or (d) any representation made by the Borrower is materially false. Upon default, the Lender may declare the entire outstanding balance immediately due and payable. A late payment fee of 5% of the overdue amount shall apply to any payment not received within the grace period.
8.
COLLECTION COSTS
In the event of default, the Borrower shall pay all reasonable costs and expenses incurred by the Lender in collecting amounts owed, including legal fees and disbursements on a substantial indemnity basis, court costs, and other out-of-pocket expenses. This obligation shall survive repayment of the Loan.
9.
CRIMINAL RATE COMPLIANCE
The total cost of borrowing under this Agreement — including all interest, fees and charges — shall not exceed the criminal rate of interest in section 347 of the Criminal Code (Canada), R.S.C. 1985, c. C-46. Effective 1 January 2025 (Budget Implementation Act, 2023), that rate is an annual percentage rate (APR) of thirty-five percent (35%) for consumer loans and loans of $10,000 or less; commercial loans between $10,000 and $500,000 remain subject to a 48% APR cap; and commercial loans over $500,000 are not subject to the cap. If the rate under this Agreement is found to exceed the applicable criminal rate, it shall automatically be reduced to the maximum lawful rate. All interest provisions are intended to comply with the Interest Act (Canada), R.S.C. 1985, c. I-15.
10.
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. The parties hereby attorn to the exclusive jurisdiction of the courts of the Province of Ontario for any dispute arising under or relating to this Agreement.
11.
GUARANTEE
Susan R. Patel, of 250 Yonge Street, Unit 404, Toronto, ON M5B 2L7, (the "Guarantor") unconditionally and irrevocably guarantees to the Lender the full and punctual payment of all principal, interest and other amounts owing by the Borrower under this Agreement. This is a continuing guarantee of payment (not merely of collection); the Guarantor is liable as principal debtor, and the Lender may proceed against the Guarantor without first demanding payment from or pursuing its remedies against the Borrower. The Guarantor's liability is not released by any indulgence, time, variation or release granted to the Borrower, and continues until all amounts are paid in full.
12.
GENERAL PROVISIONS
Entire Agreement: This Agreement constitutes the entire agreement between the parties regarding the Loan and supersedes all prior discussions and understandings. Amendment: No amendment shall be valid unless in writing signed by both parties. Severability: If any provision is found unenforceable, the remaining provisions shall remain in full force. Waiver: Failure to enforce any provision shall not constitute a waiver of future enforcement rights. Successors: This Agreement is binding upon heirs, executors, legal representatives, successors, and permitted assigns. Counterparts: This Agreement may be executed in counterparts, including electronic counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
LENDER
First Capital Finance Inc.
Date: ____________________
BORROWER
James M. Patel
Date: ____________________
GUARANTOR
Susan R. Patel
Date: ____________________
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What Is a Loan Agreement?
A loan agreement is a written contract between a lender and a borrower that sets out the amount advanced, the rate of interest (if any), the repayment schedule and the consequences of default. It converts an informal “IOU” into a fully enforceable contract and is used by banks, private lenders, family members and businesses right across Canada.
Canadian loan agreements are governed by the common law of contract in nine provinces, by the Civil Code in Quebec, and by a handful of federal statutes that apply to interest and negotiable instruments. The Interest Act, R.S.C. 1985, c. I-15 is especially important: section 4 requires any interest expressed per period other than a year to also be stated as an annual rate, and section 3 fills in a 5% default rate when the agreement is silent but interest is payable by law.
The agreement can be secured or unsecured. Secured loans take a charge over specific collateral — vehicles, equipment, receivables — under the Personal Property Security Act (PPSA) of the relevant province, which lets the lender register a financing statement and repossess the collateral on default. Unsecured loans rely on the borrower’s general creditworthiness and the lender’s ability to sue on the debt.
What's Covered in This Template
Our loan agreement template includes the operational, financial and enforcement clauses Canadian lenders and borrowers expect to see.
Lender and Borrower Details
Full legal names, Canadian addresses and, for companies, the jurisdiction of incorporation.
Principal Amount
The total sum advanced, the currency (CAD) and the date of disbursement.
Interest Rate
A fixed or variable rate expressed per annum to satisfy section 4 of the Interest Act.
Repayment Schedule
Installment amounts, frequency, start date and final maturity date.
Prepayment Rights
Whether the borrower can repay early without penalty, a common clause in private Canadian loans.
Late Payment Charges
Default interest or administration fees applied when a scheduled payment is missed.
Security / Collateral
Optional clause granting a security interest in personal property registered under the PPSA.
Events of Default
Missed payments, insolvency, misrepresentation and cross-default triggers that accelerate the loan.
Acceleration and Remedies
The lender’s right to demand the full balance and sue for the debt on default.
Governing Law and Jurisdiction
Choice of provincial law and courts (commonly Ontario, British Columbia or Alberta).
How to Create a Loan Agreement
Follow these steps to produce a signed, Canadian-compliant loan agreement.
- 1
Confirm the Loan Structure
Decide whether the loan is demand or term, secured or unsecured, fixed or variable rate.
- 2
Enter Party Details
Add the lender, the borrower and any guarantors with full legal names and addresses.
- 3
Set the Financial Terms
Specify principal, annual interest rate, repayment amount, frequency and maturity date.
- 4
Add Security if Needed
Describe the collateral and plan to register a PPSA financing statement after signing.
- 5
Sign and Register
Both parties sign; a guarantor signs separately. Register security in the provincial PPSA where applicable.
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Templates carrying statute references are continuously updated as the law changes. Your document always reflects the current legal framework.
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Legal Considerations
Canadian loan agreements must respect federal interest rules, provincial security regimes and the criminal cap on interest.
This template is for informational purposes only and does not constitute legal advice. Consult a qualified lawyer in your province for advice specific to your situation.
Reviewed for Canadian law
The Interest Act and Annual-Rate Requirement
Section 4 of the Interest Act, R.S.C. 1985, c. I-15 provides that if interest is made payable at a rate for any period less than a year and the yearly-rate equivalent is not also stated, no more than 5% per annum can be recovered. Section 3 fills in a 5% default rate when interest is payable by law but the rate is silent. Always express the rate as a percentage per annum to avoid a section 4 haircut.
Criminal Interest Rate Cap
Section 347 of the Criminal Code, R.S.C. 1985, c. C-46 makes it an offence to enter into or receive payment of interest at an effective annual rate above 60%. This cap includes fees, insurance premiums and other charges characterised as “cost of borrowing”, so late-payment and administration charges must be monitored. Recent amendments have further reduced the cap for certain consumer loans.
Personal Property Security Acts
Each common-law province has its own PPSA, for example the Personal Property Security Act, R.S.O. 1990, c. P.10 in Ontario and the Personal Property Security Act, R.S.B.C. 1996, c. 359 in British Columbia. To perfect a security interest the lender must register a financing statement in the provincial PPSA registry; priority on the borrower’s insolvency typically goes to the first-registered secured party.
Limitation Periods
In most provinces, a lender has two years from the date of default to commence a claim on the loan under statutes like the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B in Ontario or the Limitation Act, S.B.C. 2012, c. 13 in British Columbia. A written, signed acknowledgement of the debt can restart the limitation clock, which is why lenders should document any partial payment or confirmation from the borrower.
Frequently Asked Questions
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