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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.