Rule of 78 Calculator
Estimate interest rebates and payoff balances for loans utilizing the Rule of 78 sum-of-digits amortization method.
Loan Parameters
Results
Total Interest (Life of Loan)
$0.00
Interest Earned by Lender
$0.00
Potential Interest Rebate
$0.00
Remaining Payoff Balance
$0.00
How the Rule of 78 Works
The Rule of 78 is a method used by some lenders to calculate interest on installment loans. It front-loads the interest, meaning you pay a significantly higher portion of interest in the early stages of your loan term.
When you pay off the loan early, the "rebate" is the interest you would have paid in future months, calculated by this sum-of-digits method rather than declining balance amortization.
Key Math Logic
- Calculate total finance charge based on simple interest.
- Determine the sum of digits for the loan term (e.g., 12 months = 78).
- Allocate interest in decreasing order (12/78 for first month, 11/78 for second, etc.).
- Remaining balance is the total remaining payments minus the rebate.