2 min read
Definition
The Rule of 78 (sum-of-digits) weights interest towards the start of a loan, so more of your early payments are interest. If you settle early, the interest rebate under this rule is smaller than under a straight actuarial calculation. It is largely restricted on regulated consumer credit but can still appear in some commercial agreements.
In plain terms
It quietly means early repayment saves you less than you might expect, because you have already been charged much of the interest up front.
Why it matters for your company
If an agreement uses the Rule of 78, factor a slimmer rebate into any early-settlement decision. See early settlement figure and early-repayment charge.
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Related reading
Early settlement figure
An early settlement figure is the exact amount to clear a loan before term — outstanding capital, accrued…
Read →
Early repayment charge
An early repayment charge (ERC) is a fee some lenders apply when you clear a loan before the end of its term,…
Read →Amortisation
Amortisation is the process of repaying a loan in regular instalments so that the balance reduces to zero by…
Read →
Acceleration (loan)
Acceleration is a lender demanding the whole balance at once after a default — the clause that turns a…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.