Rule of 78 Calculator

About this calculator

The Rule of 78 (also called the sum-of-digits method) is an old way of front-loading interest on fixed-term installment loans, so that early payments cover much more interest and less principal than a simple straight-line split would suggest. For a loan of n months, the digits 1 through n are summed (for 12 months that is 1+2+…+12 = 78, which gives the method its name), and each month’s share of the total finance charge is weighted by its position in that countdown — month 1 carries the largest weight, the final month the smallest.

If the loan is paid off early, the lender only earns the weighted share of interest for months already elapsed and must rebate the rest — the unearned interest. Because early months are weighted so heavily, that rebate is smaller than a borrower expecting simple pro-rata interest would assume, which is why the method has been restricted or banned on longer consumer loans in many places. This calculator takes your total finance charge, total number of payments, and payments remaining to show exactly how much rebate you should get if you pay off the loan today.