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What Is the Maturity Date of a Personal Loan?

What Is the Maturity Date of a Personal Loan?
Susan Guillory
Susan GuilloryUpdated May 27, 2022
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When you take out any type of loan, you must promise the lender that you will repay it by a certain date. That date is known as the maturity date. Lenders set a maturity date so they know they will get their money back in full within a certain time frame.If you have a personal loan, or you are thinking about getting one, it’s critical to know what the maturity date is and to make sure you meet the deadline. Read on to learn how the maturity date is set, how it affects your payments, and what happens if a loan is not paid by the maturity date.     

What Does Loan Maturity Date Mean?

For an installment loan, which requires regular fixed payments over time, the maturity date is when the entirety of the loan — both principal and interest — is due. It is the final payment date for the loan. If you hear someone say that a loan has “matured,” it means that the loan term has ended.

How Do Loan Maturity Dates Work? 

With a term loan, such as a personal loan, the loan matures on a specific date at the end of that term. So, if a personal loan has a five-year term, the maturity date would be a specified date five years from the date you took out the loan. If, for example, you took out the loan on July 1, 2030, the maturity date for the loan would be due July 1, 2035. During the time, you would make regular payments that include both principal and interest. On July 1, 2035, you would make your final payment. Whether the loan term is three months or 10 years, it would work in the same way — you make regular payments until the maturity date.         

What Is My Personal Loan Maturity Date?

To quickly find your loan’s maturity date, scan your loan documents for a paragraph titled "Maturity Date" or "Payoff Date." Loan agreements typically contain a specific section that states the date of maturity of the loan.If you can’t locate your loan agreement and you have access to your loan account online, you should be able to find the loan maturity date there. Otherwise, you can call your lender and ask. Knowing your loan’s maturity date can help you decide if you want to pay off your loan early, which can reduce the cost of the loan. However, keep in mind that lenders sometimes charge a fee called a prepayment penalty for early repayment because they miss out on interest if you pay in full before the loan matures. Make sure to read your loan agreement first so you can plan for this penalty if need be.    

Different Types of Personal Loan Maturity Dates

There are different types of personal loans, with varying terms and maturity dates. Personal loans are typically short-term, lasting anywhere from one to five years, but you may be able to get a long-term personal loan, which could be as long as 10 or 12 years. When weighing the advantages and disadvantages of personal loans, it can be a good idea to look at the loan maturity date to determine if it’s a good fit for you. Shorter terms mean higher payments, but you will generally pay less interest in the end. Longer terms will reduce your monthly payment, but typically cost more in interest. Regardless of the term you choose, your loan is said to “mature” at the end of that period or term. 

How to Calculate Your Loan Maturity Date

If you can’t locate your loan agreement to see when your personal loan maturity date is, the easiest way to figure it out is to take the loan term length and add it to the start date of the loan. You can also use an online loan calculator. By entering your loan amount, interest rate, and the length of the loan, you can get a breakdown of the monthly premium and interest payments along with your loan maturity date.

Loan Maturity Value Examples

It’s one thing to know when your loan repayment will be over, but how much will you pay over the life of your loan? This is called the loan maturity value, and it includes the principal plus the total amount of interest and fees paid on the loan. Most personal loans have fixed rates and simple interest (meaning you pay interest on the principal amount of a loan, not on the interest).Simple interest is calculated using the following formula:Simple Interest = P × R × Nwhere:P = Principal amountR = Annual interest rateN = Term of loan, in yearsSo, for example, if you take out a $5,000 personal loan with a 10% interest rate and a five-year term, you would plug in the numbers like this:Simple Interest = $5000 x 10% x 5= $2500Total Simple Interest for 5 years = $2500Total maturity value of loan: $7500You can also use one of the many online loan calculators to determine your loan’s maturity value. When calculating the true maturity value or cost of a loan, It’s important to use the annual percentage rate (APR) of the loan, since this number reflects your total costs, including interest and fees. If you use a loan’s interest rate, you will have to add any fees, such as an origination fee, to the total cost to understand the true cost of the loan.

What Happens at the Personal Loan Maturity Date?

If you’ve been making all your payments on time, that last payment would be the same amount as all your other payments. If you got behind on your payments, however, the final payment might be higher in order to fully repay any remaining principal, interest and fees. Once you make that final payment, your outstanding debt is repaid. You owe no future interest, and no longer have any obligation to the lender. If you took out a secured loan and provided an asset as collateral, the lender no longer has any claim to that asset, since you have fulfilled your end of the agreement.If you fail to pay off the loan by the maturity date, however, you risk defaulting on the loan. This means your lender may sell your debt to a debt collector, and you will likely see your credit score drop. If you secured the loan with an asset, the lender can seize this collateral to offset their losses. 

Other Important Personal Loan Information 

Now that you better understand what a personal loan maturity date is, let’s look at a few other important aspects of your loan.

Loan Amount 

Before taking out a personal loan, It’s important to carefully consider the amount you want to borrow. Having ample money at your fingertips might be tempting, but keep in mind that the larger the loan amount, the more you will pay in interest.

Loan Principal 

The loan principal is another name for the loan amount. It doesn’t include interest. 

Loan Interest Rates 

Interest rates for personal loans vary considerably depending on your credit score. In general, the higher your credit score, the lower your interest rate will be. Interest rates also vary by lender, so it can pay to shop around and compare interest rates to find the best deal. Many lenders will let you prequalify before applying, which lets you see the terms you would receive without a hard credit inquiry or impacting your credit score.

Monthly Loan Payments 

With most personal loans, each monthly payment you make consists of two parts — interest and principal. Your monthly payment stays the same for the life of the loan. However, the amounts that go toward interest and principal typically change, with more of your payment going towards principal and less towards interest as you get closer to your loan’s maturity date.

The Takeaway

Knowing your personal loan’s maturity date can help you budget for your monthly loan payments. If you still owe money at that point, it’s important to pay it off, or you risk defaulting on your loan. Once the loan has been paid off, you are no longer responsible for it.If you’re thinking about taking out a personal loan and want to know what rates and terms you might qualify for, Lantern by Sofi can help. With our online lending tool, you can instantly review and compare offers from multiple lenders.

Frequently Asked Questions

What happens if the loan is not paid by the maturity date?
What is the meaning of the maturity date of a loan?
What is the maturity date of my personal loan?
Photo credit: iStock/baona

About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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