What Is a Matured Note?

If you've wondered what someone means when he talks about matured notes, it depends on the context in which the term is used. In a general sense, a matured note is a promissory note that is due and payable. The promissory note itself is the official agreement "promising" to repay a specific debt. In investing terms, "note" most often refers to specific types of U.S. Treasury securities with unique characteristics.

Treasury Securities

The United States federal government issues debt securities with varying maturities. If the debts mature in a year or less, they're called treasury bills, or T-bills for short. T-bills are purchased for less than face value. When they mature, Uncle Sam pays the investor the face value or principal. Treasury bonds mature in 10 to 30 years. Treasury notes mature in varying degrees from two to 10 years.

Treasury Notes

Treasury notes are sold at monthly auctions. Investors can place a competitive bid where they set a predetermined price they are willing to pay to obtain a certain yield. They can also place a noncompetitive bid where there is no predetermined yield. According to TreasuryDirect, a noncompetitive bid is guaranteed to return the note the bidder desires. You can purchase the notes directly from the government and through many banks and brokerages. No direct purchase service is available for competitive bids. You will need to work that out with a broker or a bank that handles the securities.

Price Variation

Notes trade on the open market, and ownership of a bond may change hands several times before maturity. Until maturity, Treasury notes pay a fixed rate of interest twice a year. At that point, the note no longer yields interest payments but can be redeemed for the face value. Regardless of whether or not a note is purchased for more or less than face value or exactly at face value, the value remains the original promised principal.

Banking Terms

In banking and personal finance terminology, a matured note may refer to a personal loan that is due. For example, suppose you borrow $3,000 to complete the purchase of a small fishing boat. The bank lends you the money for 24 months on your signature alone without requiring collateral. At the end of the 24 months your payments should be completed, which means the note, short for promissory note, has matured.

About the Author

Vicki A Benge began writing professionally in 1984 as a newspaper reporter. A small-business owner since 1999, Benge has worked as a licensed insurance agent and has more than 20 years experience in income tax preparation for businesses and individuals. Her business and finance articles can be found on the websites of "The Arizona Republic," "Houston Chronicle," The Motley Fool, "San Francisco Chronicle," and Zacks, among others.