2 min read
Definition
An interest rebate returns the portion of interest a lender has not yet earned when you repay early. A fair actuarial calculation gives a larger rebate; the Rule of 78 gives a smaller one because it front-loads interest. The rebate is reflected in your early settlement figure.
In plain terms
Pay early and you should get back the interest you have not used — but how much depends on the method the contract uses.
Why it matters for your company
Ask how the rebate is calculated before settling early — the method changes the saving. See early settlement figure and Rule of 78.
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