If the loan was paid back as $24,000 plus the $3,114.32 over 24 even payments of $1,129.76 there would be no problem. The problem arises when you pay the loan off early as in after 12 months. After 12 months using a conventional amortization schedule, the balance owing after the 12th payment is $12,715.57 and the accumulated interest paid during those 12 months is $2,272.73

Using the rule of 78 method the accumulated interest paid during those 12 months is $2,304.59 which is $31.86 more in interest. The difference becomes more pronounced as the amortization period and the loan amount increases. For example, on a loan of $100,000 amortized for 4 years at 12% with monthly compounding the difference in accumulated interest paid after one year is $564.82 which is no small change.

Scenarios such as this can be avoided by asking for an amortization schedule. Once you look at the breakdown of the very first monthly payment you know where you stand.