Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10 5/3/83 based; site houxz.UUCP Path: utzoo!watmath!clyde!burl!ulysses!mhuxl!houxm!houxz!halle1 From: halle1@houxz.UUCP (J.HALLE) Newsgroups: net.consumers,net.misc Subject: Re: What is "rule of 78's"? Message-ID: <709@houxz.UUCP> Date: Mon, 19-Mar-84 13:46:51 EST Article-I.D.: houxz.709 Posted: Mon Mar 19 13:46:51 1984 Date-Received: Tue, 20-Mar-84 00:56:57 EST References: <1070@proper.UUCP> Organization: AT&T Bell Labs, Holmdel NJ Lines: 10 What does it mean? It means you got a bum deal. You dare not pay it off early or you get hit with a whopper penalty. Conceivably you could end up owing more than the original principal. The name has to do with the method of calculating interest. If you have n payments, you divide the principal into n parts. You then have n + (n-1) + ... + 2 + 1 interest units, or n(n+1)/2. If n=12, total = 78, hence the name. Sum of digits is a synonym. This formula is used to calculate how much interest and principal is left at any time. Basically, you calculate the total interest owed and add it to the principal. This is the new principal you owe. Check with the bank for exact details.