Rule of 78 Early Payoff Calculator
Enter the original loan terms and how many payments are complete to estimate the Rule of 78 rebate, payoff amount, and savings from paying now.
Estimated payoff amount$7,185.59
- Calculated scheduled payment
- $344.44
- Payments remaining
- 24
- Unearned interest rebate
- $1,081.08
- Finance charge already earned
- $1,318.92
- Estimated balance before fees
- $7,185.59
- Estimated savings from paying now
- $1,081.08
- Finance charge already earned
- 54.95%
- Equivalent amortized-loan balance
- $7,135.46
- Rule of 78 front-loading difference
- $50.13
Assumes equal scheduled payments and payoff immediately after a fully paid due date.
The lender payoff quote controls when contract provisions, fees, or state rules differ.
How to use this calculator
- Enter the original amount financed before the precomputed finance charge.
- Enter the total finance charge and the number of scheduled payments from the contract.
- Enter the complete payments already made, assuming payoff right after that due date.
- Add any known payoff or prepayment fee, then compare the payoff with the remaining scheduled payments.
How a Rule of 78 payoff is calculated
The Rule of 78 is used on some precomputed-interest contracts. Instead of accruing interest day by day, the contract starts with a fixed finance charge for the whole term. If you pay early, the lender may rebate the part of that finance charge treated as unearned.
This calculator uses the sum-of-digits method described in consumer-finance references. Let P be the original amount financed, F the total finance charge, N the original number of payments, k the number of payments already made, and C any payoff fee. The remaining payments are r = N - k, and the triangular sum is S(x) = x(x + 1) / 2.
The scheduled payment is A = (P + F) / N. The unearned-interest rebate is U = F × S(r) / S(N), which is the same as F × r(r + 1) / [N(N + 1)]. The finance charge already earned is E = F - U. The balance before payoff fees is B78 = A × r - U, the payoff estimate is Q = B78 + C, and the estimated savings from paying now are U - C.
Why the comparison balance matters
A Rule of 78 contract earns more of the finance charge in the early part of the term than a conventional amortizing loan with the same payment. To show that effect, the calculator solves for the periodic rate that makes the same principal, term, and payment work under a normal amortization formula. It then calculates the remaining amortized balance after the same number of payments.
The front-loading difference is B78 - BA, where BA is the equivalent amortized-loan balance. A positive number means the Rule of 78 balance before fees is higher than the educational amortized comparison at that point in the schedule.
What moves the result
The number of payments remaining usually moves the rebate most. Paying near the start can leave a large unearned-interest rebate, while paying near the end leaves little to rebate. A payoff fee directly reduces savings because it is added after the rebate is calculated.
What this leaves out
This is a contract-level estimate for equal scheduled payments paid on time. It does not handle partial payments, skipped payments, late charges, daily accrued amounts between due dates, insurance or warranty refunds, minimum earned-finance-charge clauses, or rules that require a different rebate method. Use the lender's written payoff quote before sending money.
Worked example
Suppose a borrower financed $10,000 with a $2,400 precomputed finance charge over 36 payments and has made 12 payments. The calculated payment is $344.44, with 24 payments left. The remaining digit sum is 24 × 25 / 2 = 300, and the original digit sum is 36 × 37 / 2 = 666.
The rebate is $2,400 × 300 / 666, or $1,081.08. The remaining scheduled payments total $8,266.67, so the estimated balance before fees is $7,185.59. With no payoff fee, the estimated payoff is $7,185.59 and the estimated savings from paying now are $1,081.08.
Common questions
How is a Rule of 78 payoff calculated?
The payoff starts with the remaining scheduled payments and subtracts the unearned-interest rebate. The rebate equals the total finance charge multiplied by the sum of the remaining period digits divided by the sum of all period digits. Any payoff fee is then added to the result.
What is an unearned-interest rebate?
It is the part of a precomputed finance charge credited back because the loan is paid before the scheduled end. Under the Rule of 78, later periods receive smaller digit weights, so the rebate falls quickly as payments are made.
Why is my Rule of 78 payoff higher than a normal loan balance?
The Rule of 78 earns more finance charge early in the loan. A conventional amortized loan also has more interest early than late, but the Rule of 78 can be more front-loaded, especially on shorter consumer loans with a high finance charge.
Where can I find the total finance charge?
Look on the original contract or disclosure for the total finance charge over the full term. Do not use only the unpaid balance or a monthly interest amount, because the rebate formula needs the full precomputed charge.
Does paying a precomputed-interest loan early save money?
It can, if the unearned-interest rebate is larger than any payoff or prepayment fee. If the fee exceeds the rebate, the savings shown by this calculator can be zero or negative even though the loan ends early.
Why might the lender's payoff quote differ from this estimate?
The quote may include accrued amounts between due dates, late charges, refunds, contract rounding, minimum earned charges, or a rebate method required by law or contract. The lender also has the exact transaction history, while this calculator assumes regular on-time payments.