U.S. Rule (simple interest - no compounding)

Where negative amortization occurs, the U.S. Rule Compute Method can be used in place of the Normal / actuarial method to avoid charging interest on interest. The U.S. Rule approach, in effect, establishes an account for interest accrued but not paid. No interest is charged on the balance of this account. Payments are applied first to interest. If the payment is greater than the interest due, principal is reduced. If not, the interest account is increased.

Payment schedules of such loans are designed so that the balance in this account is fully paid off over the term of the loan. If you have specified U.S. Rule as the Compute Method, TValue will solve for the appropriate payment. In cases where there is negative amortization, this payment will be lower than with the actuarial method. If there is no negative amortization, U.S. Rule and the actuarial method will produce identical results.

The term simple interest is often used interchangeably with U.S. Rule. With U.S. Rule, payments are usually applied first to interest, then principal. With TValue, you can apply payments to interest or principal first.