Loan maturity dates are simply the last payment that a borrower will have to make. And so, if you have a loan you are paying back and are approaching the final payment, your loan is reaching its maturity date. Before getting to this last part of the loan process, you must fulfill some requirements, including making your monthly payments on time. Keep reading to learn more about the maturity requirements and what can happen if you cannot make your last payment. You will also find more information about other financial products with maturity dates.
What Will Determine My Loan Maturity Date?
A loan’s maturity date will be determined by a few different factors. Here is a list of them, along with an explanation of their effect on maturity date:
The Type of Loan: Credit Line vs. A Standard Loan
The type of loan you are considering will be an essential factor in your maturity date. With a non-revolving credit line, your last payment date will be determined by how much of the credit line you use. While a revolving credit account’s maturity date doesn’t really exist unless you plan on closing the account. A standard loan usually comes with equal monthly payments. Since you get a lump sum, you’ll be able to tell your maturity date immediately.
Interest Type: Variable vs. Fixed
The type of interest payments you will have to make can also determine the maturity date of a loan. With variable interest, you may see a spike in your interest rate, which could mean needing more time to repay your loan. Or you may see a decrease, making it faster to repay the loan. Fixed interest rates stay the same throughout repayment, so you won’t have any unpredictability about the loan balance and last payment.
The Repayment Terms: How Long the Loan Will Last
The repayment terms in the loan agreement will determine how long your loan will be for a fixed, standard loan. For example, let’s say you take out a car loan in October of 2022, and the agreement states that it is 3 years long or 36 months. Because car loans generally have steady monthly payments, you can count on the loan’s maturity date to be in October 2025. When beginning the search for a loan, you’ll find that short- and long-term loan options are available. Short-term loans are usually for a few weeks up to a few months, while long-term loans last for a few years or more.
Your payments will also impact the maturity date of your loan. If you make on-time payments, you’ll have your last payment due on the expected date (for a standard loan). However, if you miss multiple payments, you will likely be a few months behind on that original payment schedule.
Option for Early Repayment
Many may want to make early payments on their loans because it reduces the accrued interest owed. However, not all lenders allow for early payments without penalties. If you can pay off your loan early and decide to do so before the loan matures, then your maturity date will change.
What Conditions Have to be Met To Reach the Maturity Date of a Loan?
To reach your final payment/the maturity date of your loan, you will need to have made sure that there is no remaining balance on your loan, including interest and principal. You will have to not have missed any missed payments that you are catching up on or any other outstanding fees due to your lender. You also cannot break the loan contract in any way. Once you get to that maturity date and end up paying back the loan, you’ll be debt free!
What Kinds of Loans Have Maturity Dates?
Most loans will have a maturity date within the loan agreement that you can expect to be accurate—as long as you make your payments on time; here are some common examples:
A Personal Loan/Installment Loan
Personal loans, sometimes called installment loans, are some of the most popular loan types out there. The funds can be used for all kinds of expenses. These loans come with various repayment plans and interest rates. Those with poor credit scores may still be able to get loan approval from the right lender. You won’t need a lot of loan documents when applying for personal loans; just a government-issued photo ID, proof of income, and proof of residency. You’ll repay one of these loans in steady monthly payments until the loan is paid off completely.
A Car Loan
A car loan is a top choice for people who want to finance a vehicle purchase. With these loans, you will know exactly how many monthly payments you’ll make on each due date (you’ll pay interest and principal amount with these payments). Because of that, you should get a close estimate of a specific date for loan maturity. You can find car loans through financial institutions like banks and credit unions. You can also start with dealerships or private lenders. Once you have completely paid off your car loan, it will be yours outright, and you can sell it, trade it in, or whatever else you want!
A Payday Loan
A payday loan is an extremely short loan that makes only a few hundred dollars in loan amount for bad credit borrowers. Most of the time, these loans don’t even have a credit check, and once a borrower is approved, funds can be made available pretty quickly. You can find payday loans online or in person. Despite the convenience, payday loans are generally bad news. They come with extremely high-interest rates, which, coupled with a short loan term, can make it challenging to repay the loan on time. And so, it is best to avoid these loans if possible.
A Mortgage Loan
A mortgage loan is used to finance a home purchase. To qualify for a standard mortgage, you’ll be able to thoroughly prove your income requirements and have a good credit score. With a mortgage loan, you can expect your loan maturity to be a specified date from the start.
What Happens if You Cannot Make Your Last Loan Payment or Reach the Maturity Date?
If you cannot make the last payment on your loan right away or cannot continue making payments on the loan, the first thing you should do is talk to your lender. Chances are you will be able to work out something with them. In most cases, a late payment with a fee or a small adjustment to your payment plan will work, especially if you are close to the end of your loan payment. You can also look into changing your loan repayment plan by refinancing if necessary to make those last couple of payments.
Remember that the more payments you miss, the more extended your loan maturity date will be. Along with that, your payment history will impact your credit score. Even a single missed payment will hurt your score and stay on your credit reports for up to seven years.
What Other Dates Are Important With a Loan?
The maturity date for your loan can definitely be helpful to know about with a loan. It can allow you to figure out when you’ll be debt free and what repayment will look like. In addition to paying attention to the maturity date of your loan, it will also help to pay attention to a few other essential aspects of loan dates:
The Monthly Due Date of the Loan
One of the most important dates with a loan is the due date. Payment history is such an important factor in determining your credit score, so making your payments on time is crucial for a healthy score. In most cases, your loan payments will be due on the same day each month. Many people set up automatic payments on their loans because it means not having to remember monthly due dates.
The Start of Your Loan
The start date of your loan will also be another important date to remember. You’ll have to begin planning and budgeting enough funds to start paying your loan. Once that first payment starts, you’ll have a monthly payment until your loan is paid off.
Maturity Dates With Investments?
Investment accounts also have maturity dates. However, unlike a loan, it will mean a completely different thing. Generally, with investments, the maturity date will indicate the date you can or should cash out your investment. Here are some examples of different types of investment products and what their maturity dates mean/what they look like.
A traditional CD offers returns for those who invest money for an agreed-upon period of time. The maturity date with a CD will be when you can withdraw your funds. It is crucial to keep it in mind because an early withdrawal will mean penalties, while a late withdrawal may mean automatic renewal.
A bond is a popular investment type. With these, once the bond matures, you will get what you put into it plus interest. Its maturity date is when it will be worth its value. Bonds can have a long wait until their maturity date, sometimes up to 30 years! Before considering a bond to invest in, it is important to do your research to assess your risk.