Scott finances a Jet Ski for $4,600 by taking out an installment loan for 48 mon

Question

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.

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.

Explanation / Answer

Accoridng to Rule of 78:

Interest paid till 36 montsh=sum(1:36)/sum(1:48)=36*37/(48*49)=0.566327 times 2759.84=$1562.971

total payments=153.33*36=$5519.88

hence, loan payoff=5519.88-1562.971=$3956.909

So, loan outstanding=4600-3956.909=$643.091

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