Loan Maturity Date: Understanding and Calculating

The maturity date of a loan is the date upon which the principal amount of a loan becomes due and payable. For an installment loan that requires regular payments over time, the maturity date is the date upon which the entirety of the loan is due and payable. Loans have maturity dates so the lender is assured its money will be paid back within a set time frame. Calculating the maturity date for your loan is a fairly straightforward process.

Step 1

Review your loan documents to determine the principal amount of your loan. The principal is the amount borrowed from the lender. If you have no loan documentation, ask the lender for the amount of the principal balance of the loan. For example, the loan may have a principal balance of $10,000.

Step 2

Review your loan documents to determine the interest rate on the loan. Again, if you have no documentation, contact the lender regarding your interest rate. For example, the interest rate of your loan may be 5 percent per year.

Step 3

Determine how frequently you must make payments on the loan, including the payment amount. The majority of loans require monthly payments. The loan documents contain the frequency of repayment. Otherwise, the lender may be contacted to obtain this information. In the example, the lender may require monthly payments of $500.

Step 4

Track the interest accrued per month against the principal paid off per month. The best way to track the payments are on a spreadsheet. In the example, take note of the principal balance of the loan, $10,000. Create a column for each monthly payment. Write $500 next to each month for the loan payment. Calculate the amount of interest per month. In our example, multiply 0.05 (5 percent) by $10,000 to get a yearly interest of $500. Thus, during the first month, the loan will accrue one-twelfth of $500 in interest, or $41.66.

Step 5

Recalculate the interest accrued on the loan each month. For example, during the first month, a payment of $500 will be made. Of this payment, $458.34 will go to principal and $41.66 will go toward interest, as calculated above. During the next month, recalculate the interest based upon a principal balance of $9,541.66, which is the original principal balance, subtracted by the principal payment of $458.34. Repeat this step until the balance of the loan is zero. Keep track of the number of months that it takes to reach zero. The number of months is the maturity date.

Tip

Review the documents for a paragraph titled "Maturity Date" or "Payoff Date." Many loan documents contain a specific paragraph that states the date of maturity of the loan.

Manually calculating the maturity date of a loan is also known as creating the loan's amortization schedule.