Scott finances a Jet Ski for $4,600 by taking out an installment loan for 48 months. The payments are $153.33 per month and the total finance charge is $2,759.84. After 36 months, Scott decided to pay off the loan. After calculating the finance charge rebate (using the "Rule-of-78"), find his loan payoff.

Question

Quizplus · Accepted Answer

The Rule-of-78 is used to calculate the finance charge rebate for early loan payoff. After 36 months, Scott has 12 months remaining. The sum of the digits for 48 months is 1176, and for 12 months is 78. The rebate is calculated as (78/1176) * $2,759.84 = $183.05. The remaining balance is $4,600 - (36 * $153.33) = $1,079.12. Adding the remaining finance charge ($2,759.84 - $183.05) gives a payoff of $1,656.91.

Scott Finances a Jet Ski for $4,600 by Taking Out