Which formula dictates that you pay more interest at the beginning of a loan and pay less and less interest as the debt is reduced?
A)Adjusted balance method
B)Previous balance method
C)The rule of 78s
D)Average daily balance
E)Accelerated balance

Question

Quizplus · Accepted Answer

The rule of 78s is a method used in lending that pre-calculates the total interest over the life of a loan and front-loads the interest payments. This means that in the early payments, a larger portion goes towards interest, and as the loan matures, more of the payments go towards the principal. This method is often used in auto loans and personal loans.

Which Formula Dictates That You Pay More Interest at the Beginning