Rule of 78

Definition

A formula used to determine rebates on interest for installment loans. For a 12 month loan: 1 + 2 + ... + 12 = 78. After the first month, 12/78th of the interest is owed, 11/78ths after the second month, etc.

Use Rule of 78 in a sentence

I did not use the rule of 78 formula and I think I should start because it would be really helpful to all of us.

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The Rule of 78 was employed by the financial analyst during his presentation during the weekly team meeting which was focused on installment loans.

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Rather than rely of brute force calculations when determining interest payments and debt service costs, many accountants simply use the handy rule of 78.

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