Loan Matures Meaning and Definition
When you look at your contract and see the words “loan matures,” this means the end date of the loan or when your last payment is due. It is the date you must finish paying off your loan.
Types of Loan Maturity Dates
Several parts of the loan agreement determine a loan’s maturity date. The loan provider will use the length and type of the loan, as well as the amount of credit they are extending, to help reach the final loan maturity date.
Credit lines that can be used many times (revolving credit) do not necessarily have a maturity date. The repayment date will change each time you borrow and repay the money.
Personal and installment loans, such as car and home loans (mortgages), payday loans, and cash advance loans, will have maturity dates. The most common installment loan requires payment of the same amount at the same time each month. This type of loan may take weeks, months, or even years to repay, and the loan maturity date is listed in the loan contract’s repayment terms.
For example, if you buy a car on January 1, 2024, your loan agreement may say that you need to pay off the total amount of your loan and all the interest you owe within three years or 36 months. That means the loan maturity date, or the day the final payment is due, is January 1, 2027.
FAQ About Loan Maturity Dates
Explore commonly asked questions to get additional details about loan maturity dates.
What Happens When a Loan Matures?
If you have made all payments as agreed by the loan maturation date, you have reached the last payment you must make to that person or company. Your obligation to pay it back is complete, leaving you debt-free!
You have also improved your personal credit history. With every on-time payment and loan agreement honored, you show other lenders that you can take careful responsibility for your money and adhere to agreements. This demonstration strengthens your credit score and allows more flexibility with lending and purchase options in the future.
Why is a Maturity Date Important?
A maturity date on a loan is an important planning tool when you are considering borrowing money. It tells you how long you must plan on being able to continue paying your debt according to the terms of the loan. You must budget and plan for this expense throughout the term.
Can I Change My Loan Maturity Date?
The most common way to change the maturity date of a loan is to make extra payments. If the loan agreement allows you to do this, your loan maturity date will move up as you pay down the owed amount. Your loan obligation will end sooner than you and the loan provider agreed.
What Happens if You Don’t Pay a Loan by the Maturity Date?
You should talk to your lender when you realize you cannot pay off a loan by the maturity date. Sometimes, they will adjust the loan terms or refinance the loan. These actions may include additional fees.
If you miss payments during your scheduled repayment period, your loan maturity date will also change. You will not reach your final payment until you pay the entire debt. If this happens because of missed and partial payments, it will affect your credit score and ability to make purchases or borrow money for the next seven years.
Is a Loan Maturity Date Different from an Expiration Date?
A maturity date and an expiration date aren’t the same thing. The maturity date is when an established loan ends, while an expiration date shows a time limit on whether a loan can be accepted. The expiration date may also refer to the amount of time when the terms can be changed before the lender accepts the loan and it becomes a contract.
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