Rule of 78 Calculator | Not Reducing-Balance Interest

Reducing-balance interest charges each period on the remaining principal, so interest usually falls as the principal falls. The Rule of 78 is different: it allocates contracted interest by a declining fraction, with more interest assigned to earlier months. An early-settlement rebate is therefore not “remaining months times average interest”.

Many Hong Kong personal loans and car loans use the Rule of 78 for early settlement, even if marketing mentions flexible repayment. A product labelled reducing-balance still has to be checked against the contract. This page models Rule of 78 only and is not for ordinary mortgages.

Not every loan uses this method. Some contracts amortise on an effective annual rate, and some add a handling fee or a minimum charge. A leaflet that says “no early-repayment penalty” can still return only a small rebate. After the halfway point, the remaining rebate is often small enough that a fee can make settlement more expensive than finishing the instalments.

This page estimates the settlement figure, allocated interest, rebate and fee under the Rule of 78, then compares finishing the loan with paying it off now. If the lender has given a settlement amount for a stated date, enter that quote. For a Hong Kong mortgage, use the mortgage prepayment calculator.