Rule Of 78

Dictionary Says

Definition of 'Rule Of 78'

A method of allocating the interest charge on a loan across its payment periods. Under the Rule of 78, periods are weighted by comparing their numerical values to the sum of all the digits of the periods. The weights are applied in reverse, applying large weights to early periods.


Investopedia Says

Investopedia explains 'Rule Of 78'

When paying off a loan, the repayments consist of two parts: the principal and the interest charge. The Rule of 78 weights earlier payments with more interest than later ones. If the loan is not terminated or prepaid early, the total interest paid between simple interest and the Rule of 78 will be equal. However, because the Rule of 78 weights the earlier payments with more interest than a simple interest method, paying off a loan early will result in the borrower paying more interest overall.

This method of allocating interest was commonplace in loans for consumer goods, such as automobiles. However, the U.S. government has outlawed the use of the Rule of 78 for loans longer than five years. This is largely because this method penalizes borrowers who pay off debts early.
Search results for

'Rule Of 78'

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    ... Passive; 10.6 Suitability Factors; 10.7 Investment Objectives; 10.8 FINRA Conduct
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    ... Passive; 10.6 Suitability Factors; 10.7 Investment Objectives; 10.8 FINRA Conduct
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  • Practical And Affordable Hedging Strategies

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    ... 78, 157, 4.85, 0.031. 78, 248, 5.80, 0.023. 78, 540, 8.00, 0.015. ... As a rule, longer
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    ... scores the worst at a very low 154, while China and India come in at 78 and 87 ... Rule
    of Law The idea of the rule of law is closely related to corruption, but it ...
  • Are Technology Stocks In Trouble? - Investopedia.com

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    ... and Netflix, the company that redefined the video rental market, has plunged 78%
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    ... Observation, X, X - µ, (X - µ) 2. 1. 78, 3.85, 14.82. 2. 76, 1.85, 3.42. 3. 59,
    -15.15, 229.52. 4. 88, 13.85, 191.82. ... 12. 81, 6.85, 46.92. 13. 78, 3.85, 14.82. 14 ...
  • The Life Of A $20 Bill - Investopedia.com

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    ... As a rule, my cousins the $1, $5 and $10 bills last between 1.3 and ... According to
    a study by the Argonne National Laboratory, 78% of bills from Miami , Houston ...
  • Using The Pullback In Gold

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    ... This is not always the case, but can be used as a general rule of thumb. ... The ETF
    is made up of mainly US and Canadian miners (78%) and the two largest holdings ...

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