Answer first
What this calculator tells you
Calculate the interest refund when a precomputed loan is paid off early under the Rule of 78. Check what an early payoff really saves on a loan that front-loads its interest. Formula: Total interest = payment × months − amount; interest earned through month k = total × k(2n − k + 1) ÷ [n(n + 1)]; refund = total − interest earned. At the worked-example inputs, the interest earned by the lender (rule of 78) is $1,490. Holding every other input steady, moving APR from 4.0% to 12.0% moves the result from $727 to $2,290.
Transparent method
The formula
Check what an early payoff really saves on a loan that front-loads its interest.
Worked example
Example inputs
How to interpret the result
The Rule of 78 is a way to split a precomputed loan's interest across the months so that early payments carry more of it. On $20,000 at 8 percent over 48 months, the total interest is $3,436.41. Paying off after month 12 leaves the lender with $1,490.28 under this rule and refunds $1,946.13, less than a level-interest schedule would.
At the worked-example inputs the interest earned by the lender (rule of 78) is $1,490. It rises with APR, amount financed, month you pay off the loan and loan term (months).
Issuer terms, fees and payment allocation rules may differ.
Before you rely on it
What to check
Ask the lender how it computes a payoff. Many US states restrict the method on longer loans and the federal Rule of 78 ban covers consumer loans over 61 months, so confirm which applies to yours.
The common error
Where people go wrong with rule of 78 calculator
Assuming an early payoff saves the interest left on a normal amortization schedule. Under this rule the refund is smaller, because the early months keep the biggest share of interest.
Sensitivity evidence
How APR changes the interest earned by the lender (rule of 78)
Holding every other input at the worked-example value, moving APR from 4.0% to 12.0% moves the interest earned by the lender (rule of 78) from $727 to $2,290: a spread of $1,563, or 105% of the worked-example result.
| APR | Interest earned by the lender (Rule of 78) | Interest refunded | Monthly payment |
|---|---|---|---|
| 4.0% | $727 | $949 | $452 |
| 6.0% | $1,104 | $1,442 | $470 |
| 8.0%worked example | $1,490 | $1,946 | $488 |
| 10.0% | $1,886 | $2,462 | $507 |
| 12.0% | $2,290 | $2,990 | $527 |
Every input, tested
Which input moves the interest earned by the lender (rule of 78) most
Of the 4 inputs, APR moves the interest earned by the lender (rule of 78) most ($782 across the range tested) and loan term (months) moves it least ($56).
| Input | Tested from | To | Interest earned by the lender (Rule of 78) at each end | Swing |
|---|---|---|---|---|
| APR | 6.0% | 10.0% | $1,104 to $1,886 | $782 (52%) |
| Amount financed | $18,000 | $22,000 | $1,341 to $1,639 | $298 (20%) |
| Month you pay off the loan | 11 | 13 | $1,382 to $1,595 | $213 (14%) |
| Loan term (months) | 43 | 53 | $1,460 to $1,516 | $56 (3.8%) |
Two variables at once
Interest earned by the lender (Rule of 78) by APR and amount financed
Across the grid the interest earned by the lender (rule of 78) runs from $581 to $2,748. Moving APR from 4.0% to 12.0% shifts it by $1,563 at the middle column, and moving amount financed from $16,000 to $24,000 shifts it by $596 at the middle row, so APR is the bigger lever here.
| APR \ Amount financed | $16,000 | $20,000 | $24,000 |
|---|---|---|---|
| 4.0% | $581 | $727 | $872 |
| 6.0% | $883 | $1,104 | $1,325 |
| 8.0% | $1,192 | $1,490 | $1,788 |
| 10.0% | $1,509 | $1,886 | $2,263 |
| 12.0% | $1,832 | $2,290 | $2,748 |
The highlighted cell is the worked example: $1,490.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Amount financed | $20,000 | Enter the amount financed used in this calculation. |
| APR | 8.0% | Enter the APR used in this calculation. |
| Loan term (months) | 48 | Enter the loan term (months) used in this calculation. |
| Month you pay off the loan | 12 | Payoff after this many monthly payments have been made. |
| Interest earned by the lender (Rule of 78) | $1,490 | |
| Interest refunded | $1,946 | |
| Monthly payment | $488 | |
Inputs, definitions and assumptions
Amount financed
Enter the amount financed used in this calculation. The prefilled worked-example value is $20,000.
APR
Enter the APR used in this calculation. The prefilled worked-example value is 8.0%.
Loan term (months)
Enter the loan term (months) used in this calculation. The prefilled worked-example value is 48.
Month you pay off the loan
Payoff after this many monthly payments have been made. The prefilled worked-example value is 12.
How to use this calculator
- 1Verify the inputs. Gather amount financed, APR, loan term (months) and month you pay off the loan from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the interest earned by the lender (rule of 78) at $1,490. Store your own version of it as Scenario A.
- 3Test one change. Start with APR, the input with the biggest effect here: moving APR from 6.0% to 10.0% takes the interest earned by the lender (rule of 78) from $1,104 to $1,886, a swing of 52% of the worked-example figure.
- 4Check the extremes. At half the example APR (4.0%) the interest earned by the lender (rule of 78) is $727; at double (16.0%) it is $3,125.
People also ask
Frequently asked questions
How do you calculate rule of 78?
Total interest = payment × months − amount; interest earned through month k = total × k(2n − k + 1) ÷ [n(n + 1)]; refund = total − interest earned. Enter amount financed in dollars and APR in percent (8 means 8%). At the worked-example inputs the interest earned by the lender (rule of 78) is $1,490.
What does the rule of 78 result mean?
Check what an early payoff really saves on a loan that front-loads its interest. At the worked-example inputs the interest earned by the lender (rule of 78) is $1,490. It rises with APR, amount financed, month you pay off the loan and loan term (months).
How much does APR change the interest earned by the lender (rule of 78)?
Holding every other input at the worked-example value, moving APR from 4.0% to 12.0% moves the interest earned by the lender (rule of 78) from $727 to $2,290, a spread of $1,563.
What are the limits of this rule of 78 calculator?
Issuer terms, fees and payment allocation rules may differ. The tables on this page test APR only from 4.0% to 12.0%; a value outside that range is not tabulated here.
Which input moves the interest earned by the lender (rule of 78) most in the rule of 78 calculator?
Ranked by how far each moves the interest earned by the lender (rule of 78) across the range tested: APR ($782, 52%), amount financed ($298, 20%), month you pay off the loan ($213, 14%) and loan term (months) ($56, 3.8%).
If I double APR in the rule of 78 calculator, does the interest earned by the lender (rule of 78) double?
Doubling it from 8.0% to 16.0% takes the interest earned by the lender (rule of 78) from $1,490 to $3,125, which is 2.10 times the worked-example figure. So the result grows faster than the input does. Halving it to 4.0% gives $727.
How much does amount financed matter in the rule of 78 calculator?
The worked example uses $20,000. With the other inputs left at the worked example, moving amount financed from $18,000 to $22,000 takes the interest earned by the lender (rule of 78) from $1,341 to $1,639, a swing of 20% of the worked-example figure.
How much does loan term (months) matter in the rule of 78 calculator?
The worked example uses 48. With the other inputs left at the worked example, moving loan term (months) from 43 to 53 takes the interest earned by the lender (rule of 78) from $1,460 to $1,516, a swing of 3.8% of the worked-example figure.
How much does month you pay off the loan matter in the rule of 78 calculator?
The worked example uses 12. Holding every other input at its worked-example value, moving month you pay off the loan from 11 to 13 takes the interest earned by the lender (rule of 78) from $1,382 to $1,595, a swing of 14% of the worked-example figure.
Which inputs change the interest refunded in the rule of 78 calculator?
At the worked-example inputs it is $1,946. Amount financed takes it from $1,752 to $2,141, APR takes it from $1,442 to $2,462, loan term (months) takes it from $1,609 to $2,291 and month you pay off the loan takes it from $2,054 to $1,841.
Which inputs change the monthly payment in the rule of 78 calculator?
At the worked-example inputs it is $488. Amount financed takes it from $439 to $537, APR takes it from $470 to $507 and loan term (months) takes it from $537 to $449.
Is debt consolidation a good idea?
It helps when the new rate and fees genuinely beat the blended cost of what it replaces and the cleared accounts are not used again. It converts revolving debt into an installment loan with a real end date, which is a structural improvement. Provided the balances do not simply rebuild.
Sources and evidence
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