The rule of 78 takes into consideration the fact that you pay more interest in the beginning of a loan when you have the use of more of the money and you pay less interest as the debt is reduced.
Rule of 78
A practice, called the Rule of 78, means that lenders front-load the interest they charge on a short-term loan to guarantee their profit if you pay off your loan before the end of its term.
Rule of 78
If lenders front-load the interest they charge on a short-term loan, you pay most of the interest before you begin to make substantial repayment of principal.
Next, be aware of the 'rule of 78s.' Some loan agreements stipulate that prepayments will be based on this tricky technique. A year has 12 months, and 12 + 11 + 10 + 9 + . . . + 1 = 78; somehow giving rise to the 'rule of 78s.
See also Rule of 78s .
Accounting: expenditure for a future benefit.
Banking: paying a loan before maturity.
Rule of 78s (business term)
Rule of 78's
Kiddie Tax (business term)
Sales Type Lease (in accounting)
Accrual Basis (legal term)
Disenfranchized Persons (Russian history)
Accounting for leases in the United States ...
Rule of 78 A formula used to determine rebates on interest for installment loans; since... Rules of Fair Practice Any set of rules established by NASD to protect the best interests of the securities investor.
 See also: Rebate, Saving, Finance charge, Acquisitions, Mergers
  
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