The term maturity is actually still unknown to many people. This is a commonly seen and easily encountered term in the financial and banking sector. This term, if not carefully studied, is also easily misunderstood in other meanings. So let's find out Maturity method what? What are the popular maturity methods today?
Learn about What is principal grace period?
What is the maturity method?
Bank maturity is when the principal is due, the customer must return the principal in accordance with the credit contract. Including loan term, divergence, principal amount according to the credit contract. The bank maturity rule is when you borrow money from the bank. And in the contract clearly state the time you have to pay that amount. You make that payment called expire.
Simply put, maturity is the last time to pay off a loan or savings.
What is the interest rate to maturity?
Maturity interest rate is the interest rate when you mature a bank loan, or simply understand, extend the loan period at the bank or refinance the loan when it expires and is unable to repay.
Depending on each bank, the borrower as well as the possibility of the customer's repayment ability, the maturity interest rate will be different. Usually, the time to complete the maturity procedure is usually 1-3 days, in some cases longer if there is a problem. The bank will charge interest to mature during this period from 0.3%/day or higher.
In other cases, the customer matures before the due date, which means you have money and want to repay the loan before the due date. At this time, the maturity interest rate, also known as the pre-maturity penalty fee, is usually calculated from 1-5% of the remaining balance.
For example, if you borrow 100 million VND from a bank, the term is 2 years with the form of principal payment at the end of the period. However, by the 12th month, you want to pay off the loan before maturity and incur an early maturity penalty fee of 5%.
Total early maturity penalty fee = Penalty interest x remaining principal amount = 5% x (50,000,000 x 12/24) = VND 1,250,000.
In general, each bank will have different regulations on loan or savings loan maturity and maturity methods, you should consider carefully to choose the most suitable option for your financial conditions and needs. The wrong choice can lead to a reduction in deposit interest or a very dangerous black credit trap.
Popular Maturity Methods
When learning about maturity methods, you can't ignore the popular maturities. Thereby, you will know what your maturity form is like. Currently, banks are applying two main forms of maturity: loan maturity and savings maturity. Each form has its own characteristics and benefits.
Savings maturity method
This form must be done based on commitment and agreement. Between the bank and the savings customer when the savings book has reached its maturity.
Accordingly, the bank will have to pay savings customers both principal and interest. The deposit maturity date is the last day the savings book is deposited at the bank.
In addition, the case has reached the maturity date of the savings book but the customer has not yet received the money. The bank has the right to renew the savings book by itself with the interest rate calculated according to the current interest rate. And the loan term is the same as the previous book term.
Loan maturity method
It is when the old bank loan has expired. But the borrower has yet to repay that loan and goes on to take out a new loan. When using this maturity service, customers can borrow a new loan. To pay off the old loan. This form is also known as debt maturity or debt repayment.
In addition to these two forms of bank maturity, there is one more form. That is credit card maturity. Classified in the group of bank loan maturity.
In the loan maturity method, customers can choose one of many bank maturity methods suitable to their conditions and needs, specifically as follows:
Maturity on the spot
On-the-spot maturity is a form of maturity at the same bank that the customer borrows money from. This form is often used in mortgage loans. Means when the loan contract has expired. The customer proceeds to extend another loan contract. By adding valuable collateral.
From there, the bank will evaluate the value of the collateral and the business performance. And the ability to fulfill debt obligations. Then the bank will grant the customer a certain limit and agree to continue to extend the loan.
Bank transfer due date
This maturity method is quite complicated, meaning that the customer transfers his loan at the old bank to a new loan at another bank. Usually applied when other banks have more favorable interest rates to extend the payment term.
Currently, banks are competing fiercely, so interest rates and benefits for borrowers are also better. Therefore, the maturity method of bank transfer is chosen by many people.
Maturity from external loan
This form is very popular because credit transactions take place every day with great frequency. Grasping the golden opportunity, companies and credit institutions launch the maturity form.
At this time, the borrower makes an outside loan, mortgages it with another property or has the help of a credit specialist to have money to pay the due debt at the bank. After that, the old loan has been paid off, but in fact, the customer is still borrowing money at another credit institution, usually with a higher interest rate.
After paying off the bank debt, the customer continues to make a new loan package to pay the private lender.
What is the original no-revolving maturity method?
Maturity without revolving capital is the form that until the end of the deposit term, you go to the bank to complete the payment procedures, withdraw both principal and interest and do not deposit anymore. With this maturity method, customers need to remember the expiration date of the term to complete the procedure.
Original non-revolving maturity condition
When you have any loan or savings transaction at the bank, you also need to mature. Accordingly, customers need to ensure the following maturity conditions without revolving the principal:
- Customers who have a loan, save at the bank until the time of payment.
- Customers are between the ages of 22 and 65, have full capacity for civil acts.
- If the loan matures, you need to have collateral for the bank to assess the asset's value and make a decision to support the amount of capital to mature.
- Customers with household registration/KT3 in areas where the bank's branches are located.
- In case the loan is due, customers need to ensure proof of stable income and good business situation.
Procedures, detailed deadlines
For the non-revolving maturity method of savings deposit, the procedure is very simple. When it's due, just bring your book to the bank and follow the instructions.
The required documents will vary from bank to bank. But in general, if the loan is due, you will need to prepare basic documents such as:
- Old loan contract (for customers with loan maturity)
- Documents proving identity: ID card/CCCD, passport, household registration book, temporary residence; certificate of marital status.
- Financial documents: Labor contract, salary statement of the last 3-6 months. With a business loan, you need to prepare more: business registration certificate, establishment license, financial statement ....
- Records of collateral: Documents related to collateral include red book, vehicle registration certificate, savings book...
How to calculate interest rate to maturity without principal revolving
Usually, the maturity interest rate will be different if the settlement time is different for savings customers. In case of settlement on the maturity date of the deposit term, you will enjoy a fixed interest rate according to the term.
If the term is overdue, the interest of the previous deposit term will automatically enter the principal and move to the next term. Many people, even though they do not really understand what maturity is, can still calculate the amount of interest received. Accordingly, the amount of interest will be calculated according to the following formula:
Interest amount = Deposit amount x interest rate (%/year) x actual number of days of deposit/365
In case you want to settle the payment earlier than the due date, interest will be calculated according to the demand interest rate. Accordingly, the number of days of interest will be calculated from the first day of the term to the date you settle.
For example, you save 500 million for a 1-year term with an interest rate of 10%/year. When the payment is completed at the end of the term, you will enjoy an interest rate of 50 million. But if in the middle of the year you want to settle with an indefinite interest rate at that time, it is only 0.5%. The total amount of interest you will receive is:
Semi-annual profit = 500,000,000 x 0.5%/365 x 180 = 1,233,000 VND
Distinguish between non-revolving maturity and original revolving maturity
In a word, non-revolving maturity means that you will go to the bank to complete the settlement procedure and proceed to withdraw both principal and interest without further extension. On the contrary, the principal revolving maturity is when you do not go to the bank to complete the payment procedures when it is due, the bank will automatically renew your loan or savings.
Notes on bank maturity
Once you have a clear understanding of the form of maturity, it will greatly assist you in making a decision whether to continue or not. Besides, to ensure benefits, you also need to know a few notes when the bank does not revolving capital.
Pay attention to the expiration time
For customers who choose the no-revolving method of maturity, they should pay close attention to this issue. If you still want to deposit by the due date, pay off your savings first. After that, do the new deposit procedure again.
Choose a reasonable form of sending
In case your idle money is just for accumulation, save it with a long term. It is best to deposit for a term of about 1 year to enjoy the best interest rate. In addition, you can choose to send with a shorter time to be financially proactive.
Choose a safe deposit address
This is very important affecting the maturity procedures and the interests of customers. Therefore, you should choose to save money at big banks in the state banking system.
Store the passbook carefully, without losing, tearing, or damaging it
If you understand what maturity is, you will surely know the importance of a passbook. This is proof of your savings deposit. When it needs to be due, it can't be done without a savings book.
Recently, we have shared about what the Maturity Method is and the relevant knowledge to know about maturity. Hope it is a useful source of information for everyone. Understanding the maturity method and the current maturity methods will help you make the right choice for your needs. Good luck!
Information edited by: lamchutaichinh.vn