What Does Maturity Date Mean On A Car Loan?

Car loans are one of the more helpful types of loans we can opt for.

Cars and other means of transport are essential to our everyday lives and can affect what jobs we get, where we live and our recreational activities.

What Does Maturity Date Mean On A Car Loan

Additionally, cars can act as status symbols.

People that drive fancy cars are often perceived to be rich and successful – and many people might use a high-end car as a “peacocking” technique when trying to attract a partner or a potential job.

With cars being so essential to us, we need to get one. The problem is, cars also cost quite a lot of money – particularly fancy cars. So, what’s the answer?

In this guide, we’re going to explore car loans – along with some of the jargon like maturity dates.

We’re going to examine what that means and what could happen if you fail to meet the terms on the agreement of a car loan.

What Exactly Is Meant By A Car Loan?

In its simplest form, a car loan acts like a mortgage does for a property.

You will agree to terms that often involve paying an initial deposit, with repayments to be made over a long period of time – normally at least 3 years.

Like with a mortgage, although you can use the property and do as you will with it, you do not own the property outright.

Meaning that if you do default on the repayment agreement – the lender can repossess the vehicle and all payments that you have made up until that point will be meaningless.

The ownership of the vehicle is withheld by the lender up until such time as you have made the final repayment. This final payment is known as the maturity date.

Car loans can be extremely helpful for us due to the high costs of cars these days and the lack of disposable income in expensive cities and states to live in.

They make it possible for people with low initial funds to be able to obtain a vehicle, and claim ownership eventually.

What Exactly Is Meant By A Car Loan

Depending on the lender though, it is possible that a car loan’s repayment interest rate can be very high and you might end up paying far more than the vehicle is worth over the repayment period.

These types of loans also make it possible to eventually own a vehicle that you may never have owned before, depending on how much you’re willing to spend – and sometimes dependent on your credit score.

Whatever the case, you cannot own this vehicle outright until the maturity date and all repayments have been made.

What Exactly Is A Maturity Date?

The maturity date is the date in which the borrower has been expected to have met all their repayments set out in the agreement.

If the borrower has been following the repayment schedule, this normally is the case.

However, it is entirely possible to come to the maturity date and not have met all the repayments.

This could have been an oversight for one or more months, it might have been down to an administrative error or maybe even an increase in interest rate due to missed payments in the past.

If this happens, it is vital that the borrower finalizes and meets the final requirements as soon as possible – or they might end up paying additional fees and fines or even having their vehicle seized and having no right to ownership.

It is also possible that a lender will continue to add further interest to outstanding payments – meaning a $300 outstanding installment could end up costing thousands of dollars if the borrower does not resolve it as soon as possible.

But, if you have met all the repayments and other requirements by the maturity date – then the lien is removed against the vehicle and it is now your property.

You now have the right to sell the vehicle if you so wish, and the lender no longer has a right of ownership.

It is important to note that this only applies if written in the agreement. If you have signed a lease agreement without a buyout clause, the property will still belong to the lender.

Frequently Asked Questions

Will There Be Any Money Back At The End Of Maturity?

This isn’t a typical thing to happen, but if you put down a deposit (possibly due to poor credit), you might receive a rebate.

What Exactly Is A Maturity Date

This will normally only be possible if your car, other than wear and tear, has not received serious damage and has come back in a reasonable condition.

It will also depend on how responsible and timely you have been with your repayments.

What’s The Difference Between Maturity And Amortization?

Amortization refers to the repayment dates within the schedule whereas the maturity date is when the term of the loan or lease expires.

It is possible for amortization to extend past the point of maturity. This will depend on the lender and what type of agreement you have signed.

How Do They Calculate The Buyout Figure?

The buyout figure is normally assessed by working out the price of the car at the end of your contract, in other words – how much is this car worth now.

Additionally, the lender will take into consideration the overall or actual value and assess which one is the highest and then place additional charges like registration fees, sales taxes and license fees.

Is It Possible To Pay What I Owe Before The Maturity Date?

It is normally possible to repay any loan early, but some lenders do not like it and might charge you for the privilege.

This is because they lose out on additional interest payments and they try to have contracts with longer terms, as opposed to shorter ones.

Sometimes, a lender will offer what is known as a “settlement figure”, which is typical for things like mortgages but can also apply to car loans.

If your lender allows for this, you can request a settlement figure and pay off the remaining balance for the vehicle, if this will help you.

However, it is advised that if you can afford to make larger payments in this way – a car loan might not be in your best interest.

Some people choose to pay twice a month instead of once, in order to knock down their balance more quickly.

It’s also important to remember that you’ll always pay more on top of your balance if you fail to meet your repayments.

This is because the lender will almost always add more fees, interest and charges on top of your overall balance – which will affect your maturity date, as you will still be in arrears.

Summary

Car loans and leases are a great way to access the essential means of transport that we need to get by in our everyday lives, but they come at a risk and a cost.

Before you accept the terms of a car loan, it is advised that you speak with a financial advisor and your family, to ensure you fully understand the agreement and the consequences for missed payments.

Brad Johnson