Rule of 78,
Definition of Rule of 78:
Rule 78 is a method used by some lenders to calculate the cost of interest on a loan. Under Rule 78, borrowers have to pay a large portion of the interest at the beginning of the loan cycle, which reduces the chances of the depositor repaying their loans.
How to calculate the interest payment on a fixed term loan (with interest) which is paid in full before the full term (period). Payment is necessary because the interest is not paid evenly with this interest, but the rate of payment in the first month is higher than in the following months. As a result, prepaid lenders are already paying exorbitant interest rates. See how much interest is paid each month: (1) Include the number of digits for the month in the loan term. For example, if the term is one year, then the total is (78 + 1 + 2 + 3 + ...). 11 + 12) (2) Multiply this amount by paying the reverse number and the monthly deposit. For example, if the deposit was $ 200, the interest paid in the first month would be .7 30.76 (12 x 78 x 200). This in the second month. 28.20 (11 ÷ 78 x 200), in the third month it was .6 25.64 (10 ÷ 78 x 200). However, the name of this method is misleading as the total number of months for loans repaid over a period of more than one year has exceeded 78. It is also known as numerical counting.
Rule 78 adds weight to the borrower's calculation of interest in the first half of the loan cycle, thus increasing the lender's income. This type of interest calculation program is mainly used for non-revolving fixed rate loans. Rule 78 is an important consideration for borrowers who are considering repaying their loans in advance.
How to use Rule of 78 in a sentence?
- Rule 78 regulates the cost of a pre-calculated interest rate that benefits the lender to the lender for short-term loans or when the loan is prepaid.
- You should be familiar with Rule 78 and make sure you always do your best.
- Rule 78 is a method used by some lenders to calculate the cost of interest on a loan.
- The Rule 78 method adds weight to the months of the first loan cycle so that more interest is paid more quickly.
- Shortly after learning that my financier was applying Rule 78, I decided not to pay my debt balance. Therefore, most of my payments go to the principal in interest.
- Rule 78 for access to existing interests. Useful, that's why we mention it in our presentation.
Meaning of Rule of 78 & Rule of 78 Definition