Add-On Interest refers to a loan interest calculation method where the interest is added to the principal amount at the start of the loan. The total loan repayment amount is then divided into equal installment payments.
The Rule of 78s is a method for computing unearned interest used on installment loans with add-on interest. It distributes the interest charges in a way that results in higher interest expenses earlier in the loan term.
Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.