By MoneyBees
What it costs to settle a flat-rate car loan early under the Rule of 78: the interest rebate, your lender's settlement fees, the amount to pay today and the interest you save.
A way of splitting a flat-rate loan's interest that counts more of it as earned in the early months. On a 12-month loan the months get 12, 11 and so on down to 1 parts, which add up to 78.
Total interest x m(m+1) / n(n+1), where n is the number of instalments and m the number still unpaid. On a 60-month loan settled with 35 left, you get back 1,260 / 3,660 of the interest.
Because the Rule of 78 treats more interest as already earned early on, the rebate is smaller than an even split would give. Settlement fees add to it.
It depends on the lender and is stated in your agreement. DBS, for example, charges 20% of the interest rebate plus 1% of the amount financed.
Yes. Under the Hire-Purchase Act you can complete a hire-purchase agreement at any time by giving written notice and paying the net balance due.
As early as you can. The rebate falls fastest in the first years, so the saving shrinks each month you wait.
It covers hire-purchase of cars valued at S$55,000 or less. That value counts GST and duties and leaves out the COE. Other loans follow the terms of the agreement.
Possibly a PARF rebate and a COE rebate, which are separate from the loan. The PARF and COE rebate calculator works them out.
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