Rule of 78

• Used to calculate how much interests rebate to receive upon early redemption of car loan.
• Total Loan = Principal + Interests.
• Interest Rebate = { [n(n + 1)] / [N(N + 1)] } x TI

where

n = no. of months remaining on loan.

N = Total loan period (in months).

TI = Total Interests charged over the loan period.