Rule of 78 Loan Rebate Calculator

The Rule of 78s — also called the sum-of-the-digits method — is a way some precomputed loans allocate interest unevenly across the loan term instead of spreading it evenly like a standard amortization schedule. For a loan with T monthly payments, the digits 1 through T are added up (for a 12-month loan, 1+2+...+12 = 78, which is where the name comes from), and month k (counting down from T) is assigned k out of that total as its share of the whole finance charge — so far more interest is front-loaded into the early months than the later ones.

If the loan is paid off early after N of T payments, U = T − N months of scheduled payments remain, and the interest tied to those unearned months is refunded. Because the remaining months' shares are themselves a sum of consecutive integers, the total unearned interest has a closed form: F × (U×(U+1)) ÷ (T×(T+1)), where F is the total finance charge over the full term.

This calculator takes the loan's total finance charge as a direct input rather than deriving it, since exactly how that figure was originally computed varies by lender and loan structure — the Rule of 78s only governs how an already-known total gets allocated across months, not how that total was calculated in the first place.