Add-On Interest involves computing interest on the original amount borrowed, leading to a stated rate much lower than the Annual Percentage Rate (APR).
The Rule of 78s is a method used to calculate the interest charged on installment loans with add-on interest. It is based on the sum of the digits from 1 to 12 for a 12-month loan.
Explore the definition of add-on interest, learn the formula used, and understand the costs involved compared to simple interest. Deep dive into the differences and implications for borrowers.
