The maturity date for an installment loan like a personal loan is the date on which you’ll be finished paying off your loan. It’s important to mark this day on your calendar, not only to celebrate successfully paying back your debt, but also because it can tell you important information like how much you’ll ultimately end up paying in interest.
Here’s a look at how to figure out the maturity date for your personal loan, and other important loan terms you should know.
What Is the Loan Maturity Date?
The term “maturity date” can refer to loans or investments. In investing, it refers to the day on which you’ll receive the money you invested, for example, in a savings bond or certificate of deposit (CD). You’ll get your investment back, plus any remaining interest that’s due to you.
If you’re a borrower, the maturity date of a loan is the day your lender has scheduled for your loaned funds and any interest to be paid off in full. Provided you’ve made regular and timely payments throughout the term of the loan, you’ll have no further obligation to the lender after the maturity date.
If, for whatever reason, you still have a balance after your loan maturity date, you’ll want to talk to your lender and work out a plan to pay off the remainder of your loan.
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How Does the Loan Maturity Date Work?
Your loan’s maturity date is a part of your initial loan agreement. You can find it on your loan contract. For example, say you take out a $10,000 personal loan on June 1, 2024 with a 36-month term. The loan maturity date will be 36 months later, on June 1, 2027.
It is possible to pay off your loan early before the loan maturity. This can save you money in interest payments. However, be mindful of whether your lender charges prepayment penalties. These penalties can outweigh the advantages of paying off your loan early.
Length of a Personal Loan Maturity Date
A loan term is the amount of time you’ll have to pay it off before you reach the maturity date, usually calculated in months. You can often find personal loans with terms from 12 to 60 months, and some lenders will offer loans with terms of up to seven years or longer.
The longer your term, the longer you’ll be paying interest, which generally makes these longer-term loans more expensive for borrowers. When choosing a loan, you may want to consider one with the shortest term (and closest maturity date) possible, as long as you can comfortably afford the monthly payments.
Calculating Your Loan Maturity Value
A loan’s maturity value is the sum of the principal plus all of the interest you’ve paid on the loan. The maturity value (MV) formula is:
MV = P + I
Where “P” is the principal amount of the loan and “I” is the loan’s annual percentage rate (APR).
For example, say you take out a $10,000 personal loan with a 36-month term and 12% APR. In this case P = 10,000 and I = 12%. You can use a personal loan calculator to determine how much interest you will pay on the loan over the 36-month term, then add that to the principal loan amount. Here, the equation would look like:
MV = $10,000 + $1,957.15
In this case, MV = $11,957.15
What Happens at the Personal Loan Maturity Date?
At the personal loan maturity date, you will make your final loan payment. Provided you have stayed up-to-date with all of your payments, you will have fully paid off all of your loan principal and whatever interest you owe and have no further obligation to your lender.
However, this may not be possible if you’ve fallen on hard financial times. If you think you’ll have trouble making any of your loan payments on time, it’s a good idea to reach out to your lender immediately and see if there’s anything they can do to help. They may allow you to pay at a later date.
Recommended: What Happens If You Default on a Personal Loan?
Other Important Information on the Personal Loan Agreement
In addition to maturity, you’ll find other useful information on your personal loan agreement.
Loan Principal
Your loan principal is the initial amount of money that you borrow, and it is the amount you agree to pay back with interest. So if you take out a $30,000 personal loan, the loan principal is $30,000.
The total amount of interest that you pay will be determined by the principal, as well as the interest rate. When you make a payment each month, part of the total is applied to your interest while the remainder goes to your principal. Typically, as you make more monthly payments, a larger portion of your payment each month will go toward the principal, until your loan is repaid in full on the maturity date.
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Loan Interest Rates
The interest rate is the amount that your lender charges you to borrow, and it’s the main way that lenders make money. Most personal loans rates are fixed interest rates, meaning the rate will not change over the life of the loan. The average personal loan interest rate is currently 12.21%. But rates will vary depending on your credit score.
Variable rate loans, on the other hand, carry interest rates that are usually pegged to a market interest rate. As a result, they can change over the life of the loan.
There may also be hybrid situations in which a loan starts with a fixed interest rate for a period of time, after which it switches to a variable rate. If market rates have gone down, this can be a good thing for borrowers. But if they’ve gone up, a variable-rate loan could be more expensive than its fixed-rate counterpart.
Monthly Loan Payments
You’ll be able to find the amount you owe each month on your personal loan agreement. Your loan payment should be the same over the course of your loan unless you have a variable interest rate.
The Takeaway
For an installment loan like a personal loan, the maturity date is the day of the final loan payment. This date is set based on the loan’s repayment period — how long you have to repay the loan, including both principal and interest. A personal loan is typically considered to have short- to medium-term maturity, since terms generally run from a few months to seven years.
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FAQ
What happens if the loan is not paid by the maturity date?
If your loan is not paid by the maturity date, you’ll need to work with your lender to come up with an extended repayment plan. If your last loan payment is late or your loan is in default, you may face penalties and your credit score may be negatively affected.
What is the maturity date on a loan?
The maturity date on a loan is the date by which a borrower has agreed to pay off the loan principal and interest in full. You generally make your final loan payment on the maturity date.
When is the maturity date on a loan?
The maturity date on a loan is the date when your final payment is due. It is based on the term of your loan. If you take out a personal loan on June 1, 2024 and the loan has a 36- month term, for example, the maturity date will be June 1, 2028.
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