Rule of 78

(redirected from Rule of 78s)
Also found in: Financial, Wikipedia.

Rule of 78

A method of computing refunds of unearned finance charges on early payment of a loan so that the refund is proportional to the monthly unpaid balance.

The figure 78 is the sum of the digits of one to twelve—that is, the number of months in a one-year installment contract.

References in periodicals archive ?
Based on this opinion, Price continued to apply the rule of 78s through 1988.
The Board testified on a similar bill in the Senate in 1979 and continues to believe that the sum of the digits, or Rule of 78s, method for rebating unearned finance charges may be less fair to consumers who prepay longer-term loans in early years than other methods, such as rebates calculated according to the actuarial method.
Under the Rule of 78s method, the finance charge is earned faster than under the actuarial method.
More than half of the states have either abolished or restricted the use of the Rule of 78s rebate method.