What Does Maturity Date Mean on a Car Loan?

What Is a Car Loan Maturity Date?

A car loan maturity date is the day you're scheduled to pay off your loan. The maturity date is determined by the length of the loan term you choose. For example, if you take out an auto loan with a 60-month term on April 10, 2025, the loan's maturity date would be April 10, 2030, assuming there are no loan modifications, overpayments or other deviations along the way.

If you make all your payments on time, and for the agreed-upon amount, you will own your car free and clear when the maturity date arrives. However, if you miss payments, you may reach the maturity date only to find that your loan hasn't been fully paid off. Alternatively, your loan may be paid off ahead of schedule if you make larger payments than your lender requires.

What Happens if I Don't Pay Off My Car Loan By the Maturity Date?

If you still owe money after the loan maturity date, you could face some unpleasant consequences, including:

• Loan default: Defaulting on your loan means you haven't made your payments as outlined in your loan agreement. Depending on where you live, your auto loan may go into default as soon as you miss a payment. When you default on your loan, your lender may have the right to repossess your vehicle.
• Repossession: Your lender may be able to take possession of your vehicle, if you don't pay off your loan by the maturity date. In many states, lenders don't need to notify borrowers before taking their vehicle. (Check the laws in your state and the terms of your loan agreement for more information on repossession.)
• Legal action: When a lender repossesses a vehicle, they often sell it to recoup their losses. If they sell your car for less than what you owe, they may sue you for the remaining balance plus repossession costs.
• Credit score damage: Payment history is generally the single most influential factor used in credit scoring models. Not paying off your car loan by the maturity date may decrease your credit scores.
• Collection efforts: If you don't make your payments on time, the lender may refer your account to a collection agency. Accounts referred to collections may remain on your credit reports for up to seven years and negatively affect your credit history.

What to Do if Your Loan Isn't Paid Off by the Maturity Date

If you still owe money on your car loan after the maturity date has passed, there are a few things you should do to (hopefully) minimize the damage.

1. Review your loan agreement. Make sure you understand the terms of the loan, including all interest charges and fees you may owe, in addition to the outstanding principal.
2. Pay the remaining balance if possible. If you have enough cash saved up in an emergency fund or can get the money you need to pay what you owe, that's probably your best bet.
3. Negotiate a repayment plan. If you don't have the cash to pay your remaining balance in full, contact your lender right away and explain the situation. They may be willing to work with you to develop a repayment plan or temporarily pause your payments while you get your finances back on track.

How to Avoid Paying Past Your Car Loan Maturity Date

Paying your car loan in full by the maturity date can help you avoid additional interest charges, hits to your credit, repossession and potential legal action. Here are a few tips to keep your payments on track.

• Set a reasonable budget. Setting yourself up for success starts before you begin car shopping or sign your loan agreement. Establish a realistic budget for your vehicle that won't stretch your finances too thin each month. That may mean opting for a less expensive car or buying used instead of new.
• Choose the right repayment term. If you opt for a longer loan term, you'll pay more in interest over the life of the loan, but your monthly payments will be more affordable. Be sure to weigh the benefit of a lower payment with the risks of a longer term (including the potential to become upside down on your loan).
• Set up automatic payments. Putting your car loan on autopay allows you to set it and forget it. Just be sure you have enough money in your account so you don't overdraw your account when the payment is deducted.
• Pay more than the minimum. If you can afford it, paying more than the minimum loan payment each month will put you on track to pay off your loan early, which may help you save on interest charges. Some lenders charge a prepayment penalty for paying off a loan before the maturity date, so check your state laws and loan agreement before you start paying more than you owe.
• Check for additional fees. Make sure you understand the charges you may have to pay in addition to interest, such as late fees. These can increase the total amount you have to repay.
• Avoid deferments and payment extensions. Deferments can provide immediate financial relief by allowing you to skip a payment now and tacking it onto the end of your loan. However, interest continues to accrue during the deferment period, increasing the total amount you have to pay.

The Bottom Line

A car loan's maturity date is the day you're scheduled to pay off your loan balance. Establishing a realistic budget that allows you to make on-time payments throughout the loan term can help you pay off your balance in full by the time that day arrives.

If you find yourself struggling financially at any time during the loan term, it's crucial that you reach out to your lender immediately. Many have options for borrowers experiencing financial hardship that can help provide relief.