The Friendly Loan Agreement is designed for use in Canadian jurisdictions where individuals wish to formalize a personal lending arrangement while maintaining the informal nature of their relationship. This document type bridges the gap between verbal agreements and formal commercial loans, providing legal protection while keeping terms straightforward and understandable. It's particularly useful for loans between family members, friends, or small business associates, where parties want to avoid the complexity and cost of commercial lending but still need proper documentation. The agreement includes essential elements required by Canadian law to make it enforceable, such as clearly stated loan amounts, interest rates (if any) that comply with the Interest Act, and repayment terms, while remaining flexible enough to accommodate various personal lending scenarios.
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1. Parties: Identifies and provides full legal names and addresses of the lender and borrower
2. Background: Brief context of the friendly loan arrangement and relationship between parties
3. Definitions: Defines key terms used in the agreement for clarity
4. Loan Amount: Specifies the principal amount being lent
5. Interest Rate: States whether interest applies and if so, the rate and calculation method
6. Repayment Terms: Details of how and when the loan will be repaid, including payment schedule
7. Method of Payment: Specifies acceptable payment methods and payment details
8. Prepayment: Right of the borrower to repay the loan early
9. Default: Defines what constitutes default and consequences
10. Notices: How formal communications between parties should be made
11. Governing Law: Specifies that Canadian law governs the agreement
12. Signatures: Execution block for parties to sign and date the agreement
1. Security: Include when the loan is secured by any assets or property
2. Guarantor: Include when a third party is guaranteeing the loan
3. Late Payment Penalties: Include if specific penalties for late payment are to be imposed
4. Insurance: Include if borrower is required to maintain insurance on any secured assets
5. Assignment: Include if parties want to specify whether the loan can be assigned to others
6. Dispute Resolution: Include if parties want to specify mediation or arbitration before court proceedings
7. Joint and Several Liability: Include when there are multiple borrowers
8. Loan Purpose: Include when the loan is for a specific purpose that must be documented
1. Repayment Schedule: Detailed schedule of payment dates and amounts if installment payments are planned
2. Security Description: Detailed description of any assets provided as security for the loan
3. Promissory Note: Optional separate promissory note that can be used as evidence of debt
4. Guarantor Agreement: Separate agreement detailing guarantor's obligations if applicable
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