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From: ntt@dciem.UUCP (Mark Brader)
Newsgroups: net.consumers,net.misc
Subject: Re: What is "rule of 78's"?
Message-ID: <795@dciem.UUCP>
Date: Wed, 21-Mar-84 12:37:36 EST
Article-I.D.: dciem.795
Posted: Wed Mar 21 12:37:36 1984
Date-Received: Thu, 22-Mar-84 13:22:40 EST
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Organization: NTT Systems Inc., Toronto, Canada
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Now that the Rule of 78 has been explained, I would like to add one
point.  The difference between the rule and the really correct interest
calculation is not that large, *if* the loan is in fact being paid off
in 12 payments (which is where the 78 comes from, remember:
1+2+...+12).  But if it is a longer-term loan that is paid off in, say,
36 or 60 payments, the difference between "Rule of 78" -- which
is called that anyway -- and the correct calculation becomes much
larger when you pay it off after about half the term.

Mark Brader