Buying a car too is not easy. It’s a huge investment, and before taking any step, you need to think twice before applying for a loan. In the end, it all falls to how well you manage your finances.
Since it’s comparatively a smaller investment than buying a house, the monthly payments are not that big. Some loans are secured while others are unsecured, giving you some peace of mind if you do miss a payment. Nothing of yours will be possessed by the bank or lender.
Definition of a car loan maturity date
A car loan’s maturity date refers to the date when the note’s principal amount is due in full. On this date, which is mentioned on the certificate, the loan you took from the lender is repaid. The interest payments are made during the term end, and what remains is a set amount that settles the debt. A car loan maturity date also refers to the loan’s termination date when the debt ends and you become the proud owner of a new car.
The maturity date is established from the date the loan was issued. For example, if you took out a car loan with the payment term set for 10 years, the maturity date will be a decade later from the time you make the first monthly payment.
Title loan repossession
If you can’t pay back the loan, a lender might take several possible actions:
Let’s assume that the car loan maturity date is arriving, and you have to make the final payment. Due to unavoidable personal expenses, you can’t make the payment. When the lender calls to inform you you missed the maturity date, you apologize profusely and ask for an extension.
The payment is pushed to the next month, and the lender adds additional fee to the balance. The interest on your outstanding balance accumulates and will continue to do so if you don’t make the payment. The final amount now includes the interest and the skipped payment.
Repossession of car
Car loans also have a maturity date. Usually, this is 10 days but can be extended to more depending on the lender. If you miss the grace period, ask the lender personally for a lengthier extension, and miss that too, the lender’s last resort would be to repossess your car. The car will then be auctioned to cover the remaining loan balance.
However, this hurts both parties because the owner loses money that was made under the interest payments, and the lender has to arrange an auction, which is a waste of their time and money.
Obtaining a car title loan
One of the best things about a car title loan is that most lenders don’t ask for a credit check. However, they do require a guarantee that you will be able to pay back the loan. This is where the “secured” part of the loan comes in. The car’s title is handed to you with the promise that its legal ownership will be returned to the lender in case you don’t make the payments.
When the maturity date arrives and you make the final payment, the lender then signs over the car title to you and no longer has any ownership over the vehicle. Some lenders are quite strict about the monthly payments. If you mix a single one instead of extending your grace period, they take possession of the car.
What happens when your car loan matures
It’s the lender’s job to inform you that you have missed a payment and that your grace period has started. If you have made the payment but the lender didn’t receive it, check your bank statements to find the error. Tell the lender that the car loan has been paid in full and provide evidence to avoid repossession.
Check for debts
If your past debts were not paid on time, your account may carry additional interest charges. In this case, make sure your car loan is paid in full so that the interest rate does not accumulate over time. Sometimes, errors are made by the bank itself. If this happens, contact your bank and try to get to issue resolved within a week. Inform your lender about the hold-up so they don’t charge you any additional fee.
Look for fees
Before signing the loan contract, ask the lender if a late fee or penalty will be charged on missed payments or paying the loan early. Also, confirm if the lender offers a grace period because a few grace days can sometimes be huge lifesavers when arranging money to make the last payment on the maturity date.
Consider the consequences
We have already established that if you can’t pay off the loan, lenders will repossess your car, and the lender will auction it off to cover the remaining balance. However, if the auction doesn’t cover the remaining balance, you will be liable for the difference.
Instead of missing a payment, when you feel that you won’t be able to meet the maturity date, contact your lender immediately and explain your dilemma. Renegotiate your contract, and ask the lender if your remaining balance can be made in short installments. You will likely incur more interest charges. However, it will be better than your car being repossessed.
How to avoid repossession
Most lenders don’t want to repossess your car when you fail to make the last payment on the maturity date. It takes a lot of time to seize the car, and numerous papers need to be signed to auction it off. Not only does this take a ridiculous amount of time but money too.
It’s worth mentioning again that the moment you feel that you can’t make the payment, call your lender immediately. Better late than never because the latter option will cost you more. Based on your financial history, the lender might increase your loan’s length and modify the terms, like dividing the remaining balance into small installments. This term change will help you get back on track, and it will allow you to manage your other expenses side by side.
As long as your lender is a reputable one, you will be in safe hands. Hence, you need to talk to multiple lenders before settling on one. Often lenders develop a certain reputation for taking a “hard” approach, which is repossession after a single missed payment, no matter what trouble you are in.
Lenders do know how difficult it can be to make the monthly payments when you have other necessary expenses waiting for you. After all, their job is to lend cash. This doesn’t mean that the title company will offer you favorable terms. Only when push comes to shove, the lender will repossess your car.
Car title loan state regulations
Every state has different laws for car title loans. The changing factors include how the loan is authorized, loan terms, consumer protection, and car repossession. An automotive financing agency (CFA) categorizes the car’s legal status based on whether the product is authorized or not, whether loopholes exist, and if it is prohibited.
17 states permit car loans at triple-digit APRs. These states include:
- New Mexico
- New Hampshire
- South Dakota
Out of these states, Delaware, Illinois, Idaho, Missouri, New Mexico, Nevada, South Dakota, Utah, and Wisconsin have no set cap for the loan’s cost.
Car loan lenders operate in 4 additional states by creating a loan in such a way that it falls outside the state credit law. For example, you can get car title loans in South Carolina and Carolina for larger amounts, which helps avoid a small loan rate cap. Loans in Kansas are created as open-end credit because the state has no rate cap. As for Louisiana, car loans available there are above $350, with terms that exceed 2 months.
For the remaining states, car loans are offered at low rates because of a couple of reasons, which include:
- There are no car loan lenders in the area
- They are prohibited by the statute
- There are no existing credit laws that permit a car title loan
So, to answer your question, “What does maturity date mean on a car loan?” ― It’s the final payment date when you have to pay your loan’s remaining balance. As mentioned above, if you fail to make the payment on time, you can always contact your lender and come to a settlement to avoid any penalty. Since the lender will only repossess your car as the last resort, there are a couple of things you can do to pay back the loan. Instead of panicking and fearing that your car might be auctioned, discuss the situation with your lender and conclude so that you both can get what you want.