Personal Loan Repayment Agreement | Criminal Code s.347

A personal loan repayment agreement is a contract between a lender and a borrower that acknowledges a debt and commits the borrower to repay it on defined terms. It is the fuller cousin of the promissory note, which is a one-sided promise to pay governed by the Bills of Exchange Act. Where a promissory note simply says "I owe you and I will pay," a repayment agreement carries the full architecture of the deal: the amount advanced, the interest treatment, the instalment schedule, prepayment rights, security if any, and the consequences of missing a payment. Many lenders sign both, using the note as a negotiable record of the debt and the agreement as the governing contract.

The distinction that trips people up is between a repayment agreement and a plain loan agreement. In practice the terms overlap, but a repayment agreement puts the schedule of payments at its centre. It is the document you reach for when the loan is being paid down over time rather than in a single lump sum, and when both sides want certainty about dates, amounts and the running balance. Without a written schedule, a lender who later claims a fixed monthly instalment was agreed has almost nothing to stand on. The agreement also settles which province's law applies, a detail that decides everything from the limitation period to the enforceability of a default clause.

Personal lending in Canada is not licensed the way banking is, but it operates inside a tight federal frame layered over provincial contract law. The first pillar is section 4 of the Interest Act (R.S.C. 1985, c. I-15). It provides that where interest is expressed at a rate for any period shorter than a year, such as a monthly or weekly rate, no interest above 5% per annum is recoverable unless the contract contains an express statement of the equivalent yearly rate. A lender who writes "2% per month" and stops there risks having the recoverable interest collapse to five percent, the outcome the Ontario Court of Appeal examined in Solar Power Network Inc. v. ClearFlow Energy Finance Corp., where the court confirmed that only non-compliant rates are cut and that a clear annualised statement satisfies the section. The practical lesson is simple: always state the rate as an annual percentage. Cornell has no bearing here; the authoritative text is the federal statute itself, available through the Justice Laws summary of the Interest Act annual-rate disclosure rule.

The second pillar is section 347 of the Criminal Code (R.S.C. 1985, c. C-46), the criminal-interest ceiling. This regime changed materially on 1 January 2025. The former limit of 60% effective annual rate was replaced by a maximum annual percentage rate of 35% on the credit advanced, and the measurement shifted from EAR, which counts compounding, to APR, which does not. Interest here is defined broadly to capture fees, penalties, commissions and similar charges, so a modest stated rate padded with late fees can quietly breach the cap. For ordinary loans between individuals of $10,000 or less the ceiling is that 35% APR; the higher commercial thresholds and pawnbroking exemptions in the accompanying Criminal Interest Rate Regulations do not apply to a family loan. Charging above the ceiling is a criminal offence and can void the interest entirely. Layered on top is each province's limitations statute, which fixes how long the lender has to sue, and the common-law rules of offer, acceptance and consideration that make the contract binding in the first place. Our promissory note and loan agreement template for Canada is built to the same statutory frame.

The most common trigger is a family or friend loan large enough that a verbal promise feels inadequate. Money advanced to a sibling for a down payment, to an adult child for a vehicle, or to a friend starting out cries out for a schedule everyone can point to later, because these are precisely the loans that curdle relationships when memory diverges. A written agreement lets the lender treat the money as a genuine debt rather than a disputed gift, which matters both for repayment and, occasionally, for tax and estate reasons.

The next scenario is formalising an old informal loan. People often lend on trust, then years later want the arrangement on paper once repayment stalls or circumstances change. Reducing the existing debt to a signed agreement with a fresh schedule restarts the clock in a way that protects the lender, and it converts a shaky oral claim into an enforceable contract. A related case is the structured repayment of a settled dispute, where two parties agree that one owes the other a sum and want an orderly, dated payment plan instead of litigation.

Lenders also use this document when they want security or a guarantor. If a parent guarantees a loan to a young borrower, or the borrower pledges an asset, those terms belong in a proper agreement rather than a bare note. One edge case worth flagging: a loan of more than $500,000 to an individual is not exempt from the section 347 cap the way an equivalent commercial loan to a company would be, so high-value private lending needs care. Another is cross-border lending within a family, where choosing the governing province becomes decisive. For business-context lending between shareholders, our shareholder agreement template under CBCA section 146 addresses adjacent needs.

• The identification of the parties and the advance names the lender and borrower in full and states the exact principal advanced, the date of the advance and the currency. This anchors the debt and prevents the later argument that the money was a gift or an investment rather than a loan repayable on demand or schedule.
• The interest clause states any rate as an annual percentage, satisfying section 4 of the Interest Act, and confirms the total cost of borrowing stays below the 35% APR criminal ceiling. Where the loan is interest-free, the clause says so expressly, which removes any implied-interest argument and keeps the arrangement clean.
• The repayment schedule is the heart of the document: it fixes instalment amounts, frequency, the first and final payment dates and the running balance, and specifies how each payment is applied between interest and principal. A clear schedule is what lets a lender prove precisely what was missed.
• The prepayment clause confirms whether the borrower may repay early without penalty, a point borrowers often assume in their favour and lenders sometimes wish to limit. Stating it removes doubt.
• The default and acceleration clause defines what counts as default, the cure period allowed, and the lender's right to demand the whole outstanding balance at once. Vague default language is the single most common reason a repayment clause fails in practice.
• The governing law and dispute clause selects the province whose law applies and sets out how disputes are resolved, which in turn fixes the limitation period and the forum. For informal lending inside a household, our Canadian gift versus loan guidance in the last wishes letter template helps distinguish the two.

Because the Interest Act and Criminal Code are federal, the interest and criminal-rate rules described above apply identically in every common-law province. What changes province to province is the contract and limitations layer, and that layer decides whether a lender can still sue.

Ontario applies a basic two-year limitation period under the Limitations Act, 2002, running from the day the claim was discovered, which for a missed instalment is usually the day payment was due. A demand loan with no fixed schedule can start the clock on the day the loan is made under Ontario's rules, so lenders relying on "payable on demand" language should understand the clock may already be running. A written acknowledgement of the debt or a part payment can reset that period, which is one reason formalising an old loan is worthwhile.

British Columbia also uses a two-year basic limitation under its Limitation Act, with a fifteen-year ultimate long-stop. BC's treatment of demand obligations was deliberately reformed so that the limitation period for a demand debt generally runs from the first day after demand is made, which gives lenders more room than the Ontario position. The province's consumer and contract rules otherwise track common-law principles.

Alberta sets a two-year discovery period alongside a ten-year ultimate limitation under its Limitations Act, and courts there give real weight to written acknowledgements as a means of restarting time. A signed repayment agreement with a dated schedule creates exactly the paper trail Alberta courts look for when a lender needs to show the debt is live and quantified.

The one province this template does not serve is Quebec, where lending between individuals is governed by the Civil Code of Québec rather than the common law, with its own rules on interest, prescription and proof. A borrower or lender in Quebec needs a document drafted to the civil-law regime. For employment-linked advances documented alongside a job, our employment agreement template for Canada covers the related paperwork.

You start by identifying the parties and confirming which province's law will govern, since that choice drives the limitation period and the enforceability of your default terms. From there you enter the principal advanced and the date of the advance, then decide the interest treatment. If the loan carries interest, you state it as an annual percentage so the document satisfies section 4 of the Interest Act automatically, and the running total stays visibly below the 35% APR criminal ceiling. If it is interest-free, you record that plainly.

Next you build the repayment schedule, setting the instalment amount, the frequency and the first and last payment dates; the template calculates the balance so both sides can see the debt shrink. You then choose whether early repayment is allowed without penalty and define what triggers default, including any grace period before the lender may accelerate the balance. Finally you address security or a guarantor if the deal calls for it, and both parties sign and date. Keeping a witnessed copy each strengthens the record. For a lighter one-page acknowledgement, the affidavit template for Canada can support a sworn statement of the outstanding balance.

The error that does the most damage is stating interest as a short-period rate and stopping there. A lender who writes "1.5% per month" without the equivalent annual figure invites the section 4 remedy, and the recoverable interest can drop to five percent regardless of what both sides intended. Close behind is ignoring the section 347 ceiling: because the Criminal Code now measures against a 35% APR and counts every fee, penalty and commission as interest, a stated rate that looks fine can breach the cap once late charges pile on, and the interest can be struck out entirely. Both mistakes come from treating interest as a number to fill in rather than a regulated term.

The other frequent failures are structural. Lenders leave the default clause vague, so when payment stops they cannot cleanly prove breach or accelerate the balance, and they omit a written schedule, which leaves the exact instalment open to dispute. Many forget the limitation clock: an old loan left undocumented can quietly become unenforceable once the provincial period expires, and no agreement can revive a claim that is already statute-barred. A few try to reuse a template built for Quebec or drafted to foreign law, which imports the wrong rules on interest and prescription. Finally, some skip witnessing or keep no counter-signed copy, then struggle to prove the borrower ever agreed. Each of these is avoidable with a document built to the correct provincial and federal frame.