Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Rule Of 78s shopping experience:

1. Compare - without doubt the biggest advantage that the Rule Of 78s offers shoppers today is the ability to compare thousands of Rule Of 78s at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.

2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about

3. Testimonials - don't know anybody that has bought a Rule Of 78s? Wrong! If the Rule Of 78s is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.

4. Questions - Got a question about Rule Of 78s then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....

5. Reputation - Never heard of the company selling Rule Of 78s? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Rule Of 78s and build up a picture of their reputation for sales, returns, customer service, delivery etc.

6. Returns - still worried that even after all of the above your Rule Of 78s wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.

7. Feedback - happy with your Rule Of 78s then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.

8. Security - check for the yellow padlock on the Rule Of 78s site before you buy, and the s after http:/ /i.e. https:// = a secure site

9. Contact - got a question about Rule Of 78s, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.

10. Payment - ready to pay for your Rule Of 78s, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.

Overview Also known as the sum-of-the-digits method, the Rule of 78s is a term used in lending that refers to a method of yearly interest calculation. The name comes from the total number of months' interest that is being calculated in a year (the first month is 1 month's interest, whereas the second month contains 2 months' interest, etc.). This is an accurate interest model only based on the assumption that the lessee pays only the amount due each month. If the lessee pays off the loan early, this method maximizes the amount paid by applying funds to interest before principal.

A simple fraction (as with 12/78) consists of a numerator (the top number, 12 in the example) and a denominator (the bottom number, 78s in the example). The denominator of a Rule of 78s’ loan is the sum of the digits, the sum of the number of monthly payments in the loan. For a 12 month loan, the sum of numbers from 1 to 12 is 78 (1 + 2 + 3 + . . . +12 = 78). For a 24 month loan, the denominator is 300. The sum of the numbers from 1 to n is given by the equation n (n+1) / 2. If n were 24, the sum of the numbers from 1 to 24 is 24 (24+1) / 2 = 12 x 25 = 300, which is the loan’s denominator, D.

For a 12 month loan, 12/78s of the finance charge is assessed as the first month’s portion of the finance charge, 11/78s of the finance charge is assessed as the second month’s portion of the finance charge and so on until the 12th month at which time 1/78s of the finance charge is assessed as that month’s portion of the finance charge. Following the same pattern, 24/300 of the finance charge is assessed as the first month’s portion of a 24 month precomputed loan.

Formula for calculating the unearned interest:

u = f X k(k+1)/n(n+1) u = unearned interest; f = total agreed finance charges; k = number of months paying off early; n = total term of loan in months

History The earliest official use of the Rule of 78s to calculate the unearned portion of a loan’s finance charge was in Indiana in 1935. Most loans in 1935 were for small amounts at low interest rates for short periods of time. It reduced the cost of loan calculations in a pre-computer era and was well suited for the small, short, and low interest rate loans of the era.

In the United States, the use of the Rule of 78s is prohibited in connection with mortgage refinancings and other consumer loans having a term exceeding 61 months. 15 U.S.C. § 1615

On March 15, 2001, in the 107th United States Congress, U.S. Rep. John J. LaFalce (D-New York's 29th congressional district), introduced H.R. 1054, H.R. 1054, 107th Cong., A Bill to amend the Truth in Lending Act to expand protections for consumers by adjusting statutory exemptions and civil penalties to reflect inflation, to eliminate the Rule of 78s accounting for interest rebates in consumer credit transactions, and for other purposes a bill to eliminate the use of the Rule of 78s in credit transactions. The bill was referred to the House Committee on Financial Services on the same day.http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HR01054:@@@X On April 10, 2001, the bill was referred to the Subcommittee on Financial Institutions and Consumer Credit, where it died with no further action taken.

Precomputed Loan The Rule of 78s deals with precomputed loans, loans whose finance charge is calculated before the loan is made. Finance charge, carrying charges, interest costs, or whatever the cost of the loan may be called can be calculated with simple interest equations, add-on interest, an agreed upon fee, or any disclosed method. Once the finance charge has been identified, the Rule of 78s is used to calculated the amount of the finance charge to be rebated (forgiven) in the event that the loan is repaid early, prior to the agreed upon number of monthly payments. It should be understood that with precomputed loans, a borrower not only owes the lender the principal amount borrowed, but the borrower owes the finance charge as well. If $10,000 is lent and the precomputed finance charge is $3,000, the borrower owes the lender $13,000 at the time the loan is made, whereas a simple interest borrower owes the lender only the $10,000 principal and monthly interest on the unpaid principal.

References

External Links A complete tutorial on understanding the Rule of 78s

Overview Also known as the sum-of-the-digits method, the Rule of 78s is a term used in lending that refers to a method of yearly interest calculation. The name comes from the total number of months' interest that is being calculated in a year (the first month is 1 month's interest, whereas the second month contains 2 months' interest, etc.). This is an accurate interest model only based on the assumption that the lessee pays only the amount due each month. If the lessee pays off the loan early, this method maximizes the amount paid by applying funds to interest before principal.

A simple fraction (as with 12/78) consists of a numerator (the top number, 12 in the example) and a denominator (the bottom number, 78s in the example). The denominator of a Rule of 78s’ loan is the sum of the digits, the sum of the number of monthly payments in the loan. For a 12 month loan, the sum of numbers from 1 to 12 is 78 (1 + 2 + 3 + . . . +12 = 78). For a 24 month loan, the denominator is 300. The sum of the numbers from 1 to n is given by the equation n (n+1) / 2. If n were 24, the sum of the numbers from 1 to 24 is 24 (24+1) / 2 = 12 x 25 = 300, which is the loan’s denominator, D.

For a 12 month loan, 12/78s of the finance charge is assessed as the first month’s portion of the finance charge, 11/78s of the finance charge is assessed as the second month’s portion of the finance charge and so on until the 12th month at which time 1/78s of the finance charge is assessed as that month’s portion of the finance charge. Following the same pattern, 24/300 of the finance charge is assessed as the first month’s portion of a 24 month precomputed loan.

Formula for calculating the unearned interest:

u = f X k(k+1)/n(n+1) u = unearned interest; f = total agreed finance charges; k = number of months paying off early; n = total term of loan in months

History The earliest official use of the Rule of 78s to calculate the unearned portion of a loan’s finance charge was in Indiana in 1935. Most loans in 1935 were for small amounts at low interest rates for short periods of time. It reduced the cost of loan calculations in a pre-computer era and was well suited for the small, short, and low interest rate loans of the era.

In the United States, the use of the Rule of 78s is prohibited in connection with mortgage refinancings and other consumer loans having a term exceeding 61 months. 15 U.S.C. § 1615

On March 15, 2001, in the 107th United States Congress, U.S. Rep. John J. LaFalce (D-New York's 29th congressional district), introduced H.R. 1054, H.R. 1054, 107th Cong., A Bill to amend the Truth in Lending Act to expand protections for consumers by adjusting statutory exemptions and civil penalties to reflect inflation, to eliminate the Rule of 78s accounting for interest rebates in consumer credit transactions, and for other purposes a bill to eliminate the use of the Rule of 78s in credit transactions. The bill was referred to the House Committee on Financial Services on the same day.http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HR01054:@@@X On April 10, 2001, the bill was referred to the Subcommittee on Financial Institutions and Consumer Credit, where it died with no further action taken.

Precomputed Loan The Rule of 78s deals with precomputed loans, loans whose finance charge is calculated before the loan is made. Finance charge, carrying charges, interest costs, or whatever the cost of the loan may be called can be calculated with simple interest equations, add-on interest, an agreed upon fee, or any disclosed method. Once the finance charge has been identified, the Rule of 78s is used to calculated the amount of the finance charge to be rebated (forgiven) in the event that the loan is repaid early, prior to the agreed upon number of monthly payments. It should be understood that with precomputed loans, a borrower not only owes the lender the principal amount borrowed, but the borrower owes the finance charge as well. If $10,000 is lent and the precomputed finance charge is $3,000, the borrower owes the lender $13,000 at the time the loan is made, whereas a simple interest borrower owes the lender only the $10,000 principal and monthly interest on the unpaid principal.

References

External Links A complete tutorial on understanding the Rule of 78s