Rule-of-78s Amortization Schedule & Charts

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Rule-of-78s loans are declining in use, but should you need to create a schedule for one, use this calculator. You can check out our "Reading Room" for an article about how a Rule-of-78s loan works.

This calculator will solve for any one of four possible unknowns: "Amount of Loan", "Number of Payments" (term), "Annual Interest Rate" or the "Periodic Payment".

Enter a '0' (zero) for one unknown value.

The term (duration) of the loan is a function of the "Number of Payments" and the "Payment Frequency". If the loan is calling for monthly payments and the term is four years, then enter 48 for the "Number of Payments". If the payments are made quarterly and the term is ten years, then enter 40 for the "Number of Payments".

Normally you would set the "Payment Method" to "Arrears" for a loan. This means that the monies are lent on one day and the first payment isn't due until one period after the funds are received.

If the first payment is due on the day the funds are available, then set "Payment Method" to "Advance". This is typical for leases.

It is very helpful to be able to change the date format, thank you – would it also be possible to change the financial year format – presently this shows as calendar year but we need financial year July to June. Also, being able to set the commencement date would be beneficial – in this case, the calculator has assumed that the first payment date will be the 1st of June when it will actually be commencing in May.

The amortization schedule calculator will allow you to set the loan date and the first payment date. The Rule-of-78s is an option under

Amortization MethodAnd this is where I get to plug one of the commercial programs. 🙂

The C-Value! program will let you save a schedule and let you change the start of the fiscal year. Same for SolveIT!. They are $19.95 and $24.95 respectively.

Banks applying this rule are increasing their income in the beginning while constantly reducing lesser to lesser to the following periods. This will impact profitability uniformity to of the loan amount, i.e. good harvest in the start and low return in subsequent years.

The above number looks like constant instalment

How do I show how someone can take years off their mortgage by paying their payment 5 days early. How much will they save. I can’t adjust dates of payments?

You wouldn’t be able to do that with this calculator. You could use this one, the Ultimate Financial Calculator as it will let you set any date for any payment.

Interesting that you brought this idea up. I was thinking about this exact thing last week and in fact I was going to do the calculation and perhaps write up a brief post for The Reading Room. The one thing I realized however is this – say the payments are due on the 10th of each month. It’s not enough to pay every payment on the 5th of the month. If you do that, then only the first payment is 5 days early. The subsequent payment still have a full period of interest that will have accrued and there won’t be any savings, even though you may have paid the lender early.

I would be interested to know what you discover.