Rule of 78 calculator
On loans whose interest is fixed upfront, the Rule of 78 decides how much interest the borrower gets back when paying off early.
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How to use it
- Enter amount financed, total interest charge, number of payments and payments made.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Rebate = total interest × (n − k) × (n − k + 1) ÷ (n × (n + 1)), where n is the number of payments and k the payments made. Payoff = remaining payments − rebate.
Example
Inputs: Amount financed = 20,000, Total interest charge = 5,000, Number of payments = 24 months, Payments made = 12. Result: Interest rebate: 1,300.00; Interest kept by the lender: 3,700.00; Payoff amount: 11,200.00.
Limits and caveats
- Applies only to precomputed-interest loans whose contract names the Rule of 78. Many lenders use the actuarial method instead.
- Leaves out early payoff fees, and some countries restrict this rule.
Questions about this tool
Why is it called the Rule of 78?
The digits 1 to 12 add up to 78, and the rule assigns a one-year loan's interest to months in shares of 12/78, then 11/78, and so on.
Why is my rebate smaller than expected?
The rule loads more interest into the early months, so the rebate is less than an even split would give.
Where do I find the total interest charge?
In your loan contract, or subtract the amount financed from the sum of all payments.