Loan Maturity

In relation to loans, the term maturity refers to the date on which the loan principal is to be repaid. The principal of the loan is the amount originally borrowed, ignoring any additional interest payments which may have been required over the course of the lifetime of the loan. Many loans will be arranged in such a way that both the loan rates (interest) due on the amount originally borrowed and the capital sum itself are gradually paid off over the course of the repayment time, so that the final payment acquits the borrower of any further financial obligations, fully repaying both interest and capital.

Not all loans are arranged in such a way, however. In some cases such as zero percent credit card loans, the loan maturity date is set before the loan will be fully paid off. It is normal in these circumstances for the borrower to be sent a loan maturity notice some weeks prior to the expiration of the loan. In fact, in certain kinds of court proceedings which a creditor may initiate in response to a borrower’s default, the timely sending of a loan maturity notice may have to be demonstrated by the creditor. If the loan maturity date is reached before the loan is paid off, the borrower either has to find a sufficient sum of money to pay off the capital amount or initiate another loan.