Loan Maturity

What is Loan Maturity?

Loan maturity refers to the date on which the final payment of a loan is due, and the principal amount must be fully repaid. At the maturity date, any outstanding balance, including interest and principal, is expected to be settled. The term of the loan, which is the time from the loan’s issuance to its maturity, can vary based on the type of loan, such as short-term or long-term financing.

Types of Loan Maturity

• Short-Term Loan Maturity: Typically within a year, used for temporary financing needs.
• Medium-Term Loan Maturity: Ranges from one to five years, often used for equipment purchases or working capital.
• Long-Term Loan Maturity: Extends beyond five years, common for mortgages and business expansion loans.

Factors Influencing Loan Maturity

• Loan Amount: Larger loans may have longer terms to allow for manageable repayments.
• Purpose of the Loan: Loans for long-term investments often have longer maturities.
• Interest Rates: Higher interest rates may lead to shorter loan terms due to higher total costs.

Related Terms and Concepts

Principal, interest rate, loan term, amortization.