Jul 09, 2024

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When you borrow money, it’s important to be clear about your financial plans, including the maturity date on your loan.

This is true whether you get a loan to pay for a house, a car, a vacation, a wedding, or some other purchase. If you use an installment loan, or any kind of closed-end loan, you will want to know when you can expect to have your loan paid back.

Keep reading to learn what a loan maturity date is, how it works, why it matters, and how developing a budget with an end date in mind may help you plan for your financial future. 

What is a maturity date on a loan?

A loan maturity date is the date on which the final loan payment is due. In other words, the maturity date is when the loan is expected to be fully paid back.

Why is a loan maturity date important?

A loan maturity date tells you the number of months you’ll be making payments, helping you set a reliable budget. In this way, the maturity date gives you an understanding of how the loan affects both your immediate and long-term financial planning.

Before you apply for a loan, it’s important to understand how a maturity date may affect your monthly payments. A shorter repayment term typically increases the amount you pay each month, while a longer repayment term may lower the amount. The maturity date may also affect the interest rate you are charged. In many cases, longer loans may have higher interest rates. 

Choosing the right repayment term is vital as you plan your budget. You might think about using the Discover® Personal Loans calculator to estimate how much you’ll pay each month as you adjust your repayment terms.

How does a loan maturity date work?

When you take out an installment loan, the maturity date is part of your loan agreement. For example, if you took out a loan in March 2021 with a 48-month repayment term, your final payment would be in March 2025. At that time, your loan would be fully paid off.

Throughout the repayment term of an installment loan, you typically make one set regular monthly payment to your lender. In addition to paying back the original amount of principal that was borrowed, these payments will include interest and any fees that were charged by the lender.

How can you plan with a loan maturity date in mind?

Once you know your loan maturity date, you will know when payments are due, so you’ll be able to plan for the future. You may even be able to automate payments so that you can always pay on time. This could help you avoid any potential late fees.

For additional inspiration, you could also highlight certain financial milestones on your calendar and include your loan maturity date—the final date you will make a payment.

Here is a summary of tips to help you make your payments on time.

Keep track of the dates

Mark the date on your calendar each month when your loan payment is due. Even if you automate payments, this can help you plan ahead and remind you before the day arrives.

Set alerts on your phone

Set monthly reminder alerts on your smartphone for your payment due date or a few days before.

Automate payments

Set up monthly automatic payments from your bank account for additional convenience.

Mark your calendar for success

Be sure to note the day your maturity date is set to be reached. You might even jot down the halfway mark, or even smaller occasions on your way to paying off the loan.

Can you pay off a loan before its maturity date?

Depending on the loan and the lender, you may be able to pay off installment loans earlier than the maturity date.

Before you pay off a loan early, be sure you understand your loan agreement and any fees or prepayment penalties you may be charged. At Discover Personal Loans, there are no fees of any kind as long as you pay on time.

What is amortization?

Amortization is the process of reducing or paying off a loan over a set period of time.

What is an amortization schedule?

An amortization schedule shows the amount you pay on your loan each month and how much of that payment goes to pay principal and how much to interest. The calculation is based on the amount you borrow, the interest rate, and repayment term. This allows you to see the progress you are making on a monthly basis and when the final payment is scheduled.

In this sample amortization schedule, you can see how the amount of money applied to the interest and the principal changes with each monthly payment.

Chart detailing monthly installment loan payments applied to principal and interest With each monthly payment in an installment loan, the payment amount is divided between principal and interest. An amortization schedule from the Discover Personal Loans Account Center shows when payments are due over the life of the loan, the monthly payment amount, how payments are applied to principal and interest, and the monthly principal balances. (For illustrative purposes only.)

 

What are the next steps in your budget journey?

Once you know the maturity date of your loan and understand its importance, you are one step closer to building a healthy financial future.

With an installment loan that is right for you, you should be able to create a budget that includes loan payments and know well in advance when your loan is due to be paid off.

At Discover Personal Loans, you can design your loan around you. Pick the amount you need and the repayment term from options offered to fit your budget. For example, if you get approved for a $15,000 loan at 13.99% APR for a term of 72 months, you'll pay just $309 per month.

You can use our personal loan calculator to estimate your monthly payments based on a loan amount, your credit score, and a repayment term that you choose.

Personal Loan Calculator

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