What Happens if an Auto Loan Matures & You Owe a Balance?

An auto loan maturity date is a date when the loan balance is paid off if a borrower makes payments according to the schedule. However, when an auto loan matures, it does not necessarily mean that it is paid off. In some situations, an auto loan may have a remaining balance on the maturity date.

Balance Due

If you miss a payment anytime during the loan period and don't pay it, the bank adds the fee to the loan balance. Some banks offer to skip a loan payment during the holiday season. Borrowers may have fees associated with this offer that will also be added to the balance. When a payment is skipped, the due date advances to the next month, and interest continues to accrue. As a result, the balance due upon maturity will include the skipped payments and interest if you took advantage of such promotions.

Loan Payoff

If you owe a balance on the maturity date, you must pay it off. The bank may require a full payment at once or may be willing to negotiate. Unless you have missed or skipped payments, the balance should be small enough. If the loan is past-due and you owe a significant balance, you may request to pay it off by making several payments equal to your monthly payment amount. As long as you owe a balance on your loan, the bank will not release the lien on the vehicle.

Collections

If you owe a loan balance at maturity and become delinquent on payments, the bank can send your account to collections. The bank will charge late fees on the missed payments. The interest will continue to accrue on the balance you owe. To avoid additional fees and finance charges, you should stay current on payments. If you are unable to make a payment, notify the bank immediately. The bank may report late payments to credit bureaus even if they occur past the loan maturity date.

Repossession

If you owe a balance on an auto loan, the bank has a right to repossess the vehicle if you become delinquent on payments. Repossession process is expensive and time-consuming. Although banks try to avoid repossession as much as possible, they will do it if the value of the collateral is high enough to cover the loan payoff and the repossession costs. The bank will notify you of an impending repossession and will give you a chance to pay the past-due amount to avoid it. If you fail to pay, the vehicle will be sold at an auction. The sale proceeds will pay the loan off. You will receive any excess amount from the sale of the vehicle.