Calculator Inputs
Enter the original precomputed loan details. The calculator estimates the unearned interest refund, earned interest, principal balance, and early payoff amount.
Formula Used
Sum of digits:
S = n × (n + 1) ÷ 2
Remaining digit sum:
R = r × (r + 1) ÷ 2
Unearned interest refund:
Refund = Total finance charge × R ÷ S
Earned interest:
Earned interest = Total finance charge − Refund
Estimated payoff:
Payoff = Remaining scheduled payments − Refund + Fees + Adjustments
Here, n is the original loan term. r is the number of unpaid periods.
The calculator also compares the Rule 78 refund with a straight line refund.
How to Use This Calculator
- Enter the original loan amount from your credit agreement.
- Enter the total finance charge for the complete loan term.
- Add the total number of scheduled payment periods.
- Enter how many periods have already been paid.
- Add payoff fees, late fees, and any principal adjustment.
- Set optional refund floors when your contract requires them.
- Press the calculate button to view the refund and payoff estimate.
- Use the CSV or PDF button to save the report.
Example Data Table
This sample shows how different payoff times can change the estimated refund.
| Loan Amount | Finance Charge | Term | Periods Paid | Remaining Periods | Estimated Rule 78 Refund |
|---|---|---|---|---|---|
| $10,000 | $1,800 | 24 | 6 | 18 | $1,026.00 |
| $10,000 | $1,800 | 24 | 12 | 12 | $468.00 |
| $10,000 | $1,800 | 24 | 18 | 6 | $126.00 |
Rule 78 Refund Guide
What This Method Does
The Rule 78 method is a way to divide precomputed interest across a loan term. It gives heavier interest weight to the early payments. This means the lender earns more interest near the start. A borrower who pays off early may receive a smaller refund than expected. The method is different from simple interest. It is also different from a straight line refund.
Why Refund Timing Matters
Early payoff timing can strongly affect the rebate. When only a few payments are made, many high weighted periods may already be counted as earned. The remaining lower weighted periods create the refund. Because the weights fall over time, the refund shrinks faster in later months. This calculator helps show that pattern clearly.
What the Calculator Measures
The tool starts with the original loan amount and total finance charge. It then finds the sum of digits for the full term. Next, it finds the digit sum for the unpaid periods. The refund equals the finance charge multiplied by the unpaid weight ratio. The result also shows earned interest, principal balance, fees, and payoff amount.
How to Read the Result
The refund is the estimated unearned interest credit. Earned interest is the part kept by the lender. The payoff amount is the remaining scheduled balance after the refund, plus fees and adjustments. The comparison column shows a straight line refund. That comparison is useful for review. It does not replace your contract terms.
Practical Use
Use this page before refinancing, selling a financed item, or closing a loan early. Check every input against your agreement. Confirm whether the Rule 78 method is allowed in your location. Some contracts may use actuarial, simple interest, or statutory rebate rules. Always ask the lender for an official payoff quote before sending final payment.
FAQs
What is a Rule 78 interest refund?
It is a refund of unearned precomputed interest when a loan is paid early. The method assigns more interest to earlier periods, so the refund may be smaller than a simple pro-rata rebate.
Why is it called Rule 78?
For a 12 period loan, the digits from 1 through 12 add to 78. The same idea works for other terms by using their own sum of digits.
Does this calculator give an official payoff quote?
No. It gives an estimate based on your entries. Your lender may include daily interest, fees, legal limits, payment posting rules, or contract adjustments.
When does Rule 78 create a smaller refund?
It usually creates a smaller refund when the loan is paid off after early periods have passed. More interest is treated as earned near the beginning.
Can I compare Rule 78 with straight line refunds?
Yes. The result table includes a straight line comparison. It shows how much the refund may differ from a simple equal-period allocation.
What is the finance charge input?
It is the total precomputed interest charged for the full loan term. You can usually find it on the loan agreement or disclosure statement.
What if I made partial payments?
This calculator works best with completed payment periods. For partial periods, ask your lender how they count the payoff date and posting date.
Is Rule 78 legal everywhere?
No. Rules vary by country, state, loan type, and term. Check local law and your contract before relying on this method.