Lamin

If you were to lend somebody some money to pay a debt in Canada, is there any sort of legal paperwork that can be used to ensure you can legally get back what is owed or would this be the sole territory of a lawyer etc?

Without going into to much detail, a family member been approached for help for $20,000, which they have and knowing the person and situation they are willing to lend. However I realise the pitfalls and doubtless many stories that go with it.

A bank, credit union would obviously be the first choice however due to Covid, (CERB, CEWS) restrictions on lending and loan to value ratios this person is locked into unnecessarily high interest rates which is compounding the situation.

Thank you in advance for any constructive suggestions.

Pulaski

Overlooking entirely the question of whether making such a loan is advisable, or sensible, you can prepare and sign legal loan documents in Canada, and they are fairly widely available to download, such as here, where a variety of loan templates can be found to cover a variety of loans, and tailored as necessary.

I do not know about the requirements there may be in Canada to have such documents witnessed, notarized, or registered - I would assume that secured loans would be registered against the property or vehicle.

For $20,000 I would considered at least a brief consultation with a lawyer to discuss any pitfalls before making the loan.

plasticcanuck

If you lend money to family or friends, only do so in the knowledge you will probably not be repaid. Are you prepared to sue such people for repayment of the debt? That may be the only way you can recover your funds. If it’s one of your children then you can be repaid by a codicil in your will, reducing their share of your estate by the amount borrowed.

PMM

Hi

1. Remember the old saying " only borrow money from a pessimist, because they know they aren't going to get the money back"

Almost Canadian

But you will be dead. Who is going to get the additional funds? It won't be you!

Hurlabrick

Yeah, but from your grave you can give them the metaphorical finger and say 'so you thought you would get away with it eh?!'

dbd33

Posters may recall the saga of my brother, the non-carrier of a Canadian passport, who got stranded in the Dominican Republic. Eventually he got his mother, also my mother, to send him money there. It was "a loan" but she knows him so she changed her will to reduce his share by the amount of the loan.

One day an envelope containing UKP3,500 in cash arrived in my, and my other brother's, mail box. I called and she said "it was eating at me, I couldn't trust the executors and the lawyers. This way I know he's not ahead". Of course, I've had to keep the cash in a drawer in case the first brother wins the lottery, repays the money, and causes me to have to. do the same.

SanDiegogirl

While you can draw up your own documents setting out the terms of the loan and its repayment OR you could spend money and get a lawyer to do it for you, you'll still need to go to court to sue to get the money is the recipient does not pay up.

Pulaski

I thought that giving various relatives and acquaintainces the finger from beyond the grave, was primarily what wills were for.

scilly

I can only say that we have lent various amounts to my daughter and her husband since they got married in 1999, all with a promise to "repay it as soon as we can save it up
.
We even lent them the equivalent of my daughter's monthly salary 3 months in a row after the firm ran into money difficulties when creditors didn't pay their bills (she's a partner, so always gets paid last). Same promise, but this time we had to get some of the money from our Line of Credit when our immediate cash savings ran out, and repay it ASAP to avoid big interest.

Needless to say, none of it has been returned ................ our daughter was always very good when I lent her small sums before they married, but her OH is in charge of the treasury, and he did seem to enter the marriage with the idea that we were the "moneybags" because we both had slightly better paying jobs than his parents.

She is our only child, and we trusted her so didn't bother with any kind of document detailing what we were lending, what for, and terms of repaying.

At the moment, our will is set up so the cash value of the estate is divided into parts, everyone named in it plus charities, etc is receiving an amount of parts, so 3 parts to this person, 1 part divided between these charities, etc.

No-one knows what the "estate will be worth when we die, whether that be next year, 10 years from now, or if we hang on to be grouchy centenarians!

I do wish though that we had made more of an effort to at least specify a date by which we expected to get the money back.

I'd now be very cautious about lending $20,000 to anyone without legal advice, and perhaps most especially if it was a relation.

BEVS

Don't do it. I speak from bitter experience. Just don't do it.

Hurlabrick

I would agree with others, don't do it unless you are OK never getting the money back.

If you are still adamant you want to help out, why not suggest they get a normal loan from one of these institutions, BUT that you will lend them then difference between the 'normal' and 'unnecessarily high' interest charges on a monthly basis as the interest is charged? That would be a LOT less you would be liable to lose.

Pulaski

I am not familiar with the laws on second mortgages and registering liens in Canada, but if the borrower is a homeowner I believe you should be able to register a second mortgage for the amount you lent, and that would mean that they would be unable to sell without your loan being paid off. So then the worst case scenario, assuming that the value of the home doesn't decline below the value of the loans secured on it, is that you don't get repaid but would have a secured loan as an asset which you would leave in your will.

If you go down that route you would certainly need the advice of a lawyer, and their assistance in registering the lien.

DMajor

I recently lent a 'friend' some money to buy a truck for his work.
It wasn't such a large sum but was around $3,000
I haven't had a cent back and it's been 18 months
Don't do it is my advice
I lost the $3k and the 'friend' too..