Use the Rule of 78 to find the amount of unearned interest for the loan paid in full before the date of maturity.
-Finance charge: $315 Total number of payments: 23
Remaining number of payments, when paid in full: 4

Question

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The Rule of 78 is used to calculate the unearned interest on a loan paid off early. It allocates more interest to the earlier payments. The formula is: (Remaining payments * (Remaining payments + 1) / (Total payments * (Total payments + 1))) * Total finance charge. Plugging in the values: (4 * 5 / 23 * 24) * 315 = $11.41.

Use the Rule of 78 to Find the Amount of Unearned