Bank Loan

[luckylarry]

We went to siam Commerical bank Eight Weeks ago to try to gat a small loan 600,000 baht, we have half a Rai of empty land that we wanted to use to borrow against, they ask my Wife what her income was and she had to say Zero because we are just starting a new venture, so I said that I have a UK Pension about 30,000 Thai Baht a Month, well we got the loan today at 6.5 % over 5 years, I hope this mite help others,

[cardholder]

The land must be in a good location !

[skippybangkok]

Or time to sell ur shares in the bank

[luckylarry]

The bank value 1,2 million

[sulasno]

Bank grants 50% of the appraised value of empty land; up to 80% if there is a building

Bank's valuation is normally 60-70% of market value

[LivinLOS]

Was that simple interest or real interest ??

Obviously one is near double the other. I am always shocked at how few people realise their 'cheap' 3% car payments are not that at all. Dont they get a calculator out and verify the payments ? Or just operate on trust.

[petercallen]

I do not know how loans work here.but this is how i understand it works..

If the bank has taken a morgage on the land it should be sinple interest.

Simple interest is where you are only charged interest on the balance

owing to the bank, this can be the balance owed monthly or annually.

The other form of interset i think its called compound is where the bank

charges the interest on the full amount borrowed for the full period of

the loan,if you have this type of loan its best to pay it of as quick as you

can, sometimes the loan agreement will have a penalty clause in it if

you do this but you will still save a substantial amount of money

[LivinLOS]

I do not know how loans work here.but this is how i understand it works..

If the bank has taken a morgage on the land it should be sinple interest.

Simple interest is where you are only charged interest on the balance

owing to the bank, this can be the balance owed monthly or annually.

The other form of interset i think its called compound is where the bank

charges the interest on the full amount borrowed for the full period of

the loan,if you have this type of loan its best to pay it of as quick as you

can, sometimes the loan agreement will have a penalty clause in it if

you do this but you will still save a substantial amount of money

Erm nope.. Simple interest is when they charge interest on the full borrowed amount WITHOUT taking into consideration the paid off balance, for the full term. Over term it almost doubles the rate. Compound is also not what you think it is.

It will depend on the loan, if its a true mortgate or if its a loan secured by the collateral.

But I am sure the poster isnt one of those to only read the big writing and has done the actual maths no ones going to go trusting a bank to do it for them are they ??

[QED]

I do not know how loans work here.but this is how i understand it works..

If the bank has taken a morgage on the land it should be sinple interest.

Simple interest is where you are only charged interest on the balance

owing to the bank, this can be the balance owed monthly or annually.

The other form of interset i think its called compound is where the bank

charges the interest on the full amount borrowed for the full period of

the loan,if you have this type of loan its best to pay it of as quick as you

can, sometimes the loan agreement will have a penalty clause in it if

you do this but you will still save a substantial amount of money

Erm nope.. Simple interest is when they charge interest on the full borrowed amount WITHOUT taking into consideration the paid off balance, for the full term. Over term it almost doubles the rate. Compound is also not what you think it is.

It will depend on the loan, if its a true mortgate or if its a loan secured by the collateral.

But I am sure the poster isnt one of those to only read the big writing and has done the actual maths no ones going to go trusting a bank to do it for them are they ??

Errrm nope....

Simple interest is when the interest rate is charged only on the principle each period, compound interest is interest on principle and interest.

Simple worked example - 10% per annum over 5 years, 100,000 loan.

Simple interest, assuming you only cleared interest and not capital each year, would be 5 x 10% = total payable 50%

Compound interest - 10% in year 1 making (nominal) balance 110,000. 10% of this in year 2 = 11,000, making your balance 121,000 etc, total charged over 5 years = 61.05%, normally front loaded.

Compound interest will ALWAYS be more expensive than simple interest, whether or not they charge on your actual balance or original balance does not affect this fact, nor the terminology, this is simply down to the terms and conditions of the loan.

Sorry I don't normally go off on boring rants like this, but I hate it when people try and pass off silly notions as fact by being condescending and overpowering, when in fact they have no frigging idea what they are talking about. :jap:

[pmcd8243]

To clear up the confusion. To the original poster, what are the monthly payments and I'll do the math myself.

P

[LivinLOS]

Errrm nope....

Simple interest is when the interest rate is charged only on the principle each period, compound interest is interest on principle and interest.

Simple worked example - 10% per annum over 5 years, 100,000 loan.

Simple interest, assuming you only cleared interest and not capital each year, would be 5 x 10% = total payable 50%

Erm yes.. Thats what I said

Erm nope.. Simple interest is when they charge interest on the full borrowed amount WITHOUT taking into consideration the paid off balance, for the full term. Over term it almost doubles the rate.

Thats advertise interest and you pay on the full amount borrowed, for the full term, not discounting previously paid off money. AKA simple interest.

I borrow 500k @10% simple interest over 5 years.. They calc 500k@10% = 50k per annum.. So 5 years term = +250k.. So total to pay = 750k.. 750k/60 months = 12.5k per month.

Thats simple interest. No consideration of paid down balance over term. You disagree with this how ??

Please explain how either of his descriptions on compound or simple were correct ??

Edited August 19, 2010 by LivinLOS

[LivinLOS]

Oh and secondly many Thai loans claim you can pay off early, but then they expect the full interest payment to be met, even though your not borrowing money for the term.

So in the above 500k example.. if after 1 year (and 12 x 12.5k payments met) you decide to just pay it off in cash.. You can but you still have to pay the entire 750k (minus the 12x12.5 already paid) meaning 500k for 12 months just cost you 250k !! or ballpark 50% interest.

[IMA_FARANG]

Good for you!

I wanted to start a laundry for my Thai G/F some years ago. I needed start up money to buy washers/dryers. We had a good location in Bangkok close to a university. There was a steady demand for a laundry service from the students. I knew it would work. But Bangkok Bank would not give me a loan. (Joint account...about 500,000 baht in the account at the time). I needed to borrow about 300,000 Baht for startup costs. We couldn't get the loan. The reason stated was: "Your girlfriend has no job". My response was, "Yes, that's why we want to start a laundry, so she can run the laundry business". The answer: "No. If you already had enough money and she had a job, you could get your loan. But without a job, she can't get a loan. Even if the funds in your/her joint account can cover the loan amount."

So, bottom line, I gave it all up.

Add note: I was working outside Thailand at the time...salary about $50,000 a year. Not enough.

Edited August 19, 2010 by IMA_FARANG

[petercallen]

It seems i am wrong, I have not borrowed money for over 30 years.

The last money i borrowed was to pay of a house with a 25 year loan

I paid double payments and owned the house freehold in about 8 years.

The loan was from a building society and i only paid interest on the amount owing

[QED]

Oh and secondly many Thai loans claim you can pay off early, but then they expect the full interest payment to be met, even though your not borrowing money for the term.

So in the above 500k example.. if after 1 year (and 12 x 12.5k payments met) you decide to just pay it off in cash.. You can but you still have to pay the entire 750k (minus the 12x12.5 already paid) meaning 500k for 12 months just cost you 250k !! or ballpark 50% interest.

Yawn....

From Wiki:

Simple interest is calculated only on the principal amount, or on that portion of the principal amount that remains unpaid.

Compound interest is very similar to simple interest; however, with time, the difference becomes considerably larger. This difference is because unpaid interest is added to the balance due. Put another way, the borrower is charged interest on previous interest.

http://en.wikipedia.org/wiki/Interest

As I said, whether they charge on the original principal, or on the actual outstanding balance, does not define simple or compound interest, this is merely down to the conditions of the loan.

I was a corporate banker in the UK for 15 years, so I do have a bit of an idea what I am talking about.

[petercallen]

I do not know how loans work here.but this is how i understand it works..

If the bank has taken a morgage on the land it should be sinple interest.

Simple interest is where you are only charged interest on the balance

owing to the bank, this can be the balance owed monthly or annually.

The other form of interset i think its called compound is where the bank

charges the interest on the full amount borrowed for the full period of

the loan,if you have this type of loan its best to pay it of as quick as you

can, sometimes the loan agreement will have a penalty clause in it if

you do this but you will still save a substantial amount of money

Erm nope.. Simple interest is when they charge interest on the full borrowed amount WITHOUT taking into consideration the paid off balance, for the full term. Over term it almost doubles the rate. Compound is also not what you think it is.

It will depend on the loan, if its a true mortgate or if its a loan secured by the collateral.

But I am sure the poster isnt one of those to only read the big writing and has done the actual maths no ones going to go trusting a bank to do it for them are they ??

Banks and building societys in Australia and i expect the UK is the same are honest and explain to people

everything they want to know when applying for a loan

A lot of people do not read the entire agreement but rely on the honesty of the person they are dealing with.

I have never been mislead by any bank in Australia, the information they have given me was correct without reading all the fine print.

When dealing with banks, real estate or insurance sales people here i read everything and if they do not have a copy in English i just walk away.

[LivinLOS]

Oh and secondly many Thai loans claim you can pay off early, but then they expect the full interest payment to be met, even though your not borrowing money for the term.

So in the above 500k example.. if after 1 year (and 12 x 12.5k payments met) you decide to just pay it off in cash.. You can but you still have to pay the entire 750k (minus the 12x12.5 already paid) meaning 500k for 12 months just cost you 250k !! or ballpark 50% interest.

Yawn....

From Wiki:

Simple interest is calculated only on the principal amount, or on that portion of the principal amount that remains unpaid.

Compound interest is very similar to simple interest; however, with time, the difference becomes considerably larger. This difference is because unpaid interest is added to the balance due. Put another way, the borrower is charged interest on previous interest.

http://en.wikipedia.org/wiki/Interest

As I said, whether they charge on the original principal, or on the actual outstanding balance, does not define simple or compound interest, this is merely down to the conditions of the loan.

I was a corporate banker in the UK for 15 years, so I do have a bit of an idea what I am talking about.

http://banking.about.com/od/loans/a/simpleinterest.htm

Simple Interest Overview

Simple interest is just the amount of money paid on a loan. It is the easiest type of interest to calculate and understand. Other types of interest (like APY, APR, and compound interest) can be more complex.

Simple Interest Formula

If you want to calculate simple interest, use this formula:

I=P r t

In other words Interest (I) is calculated by multiplying Principal (p) times the Rate ® times the number of Time (t) periods.

For example, if I invest $100 (the Principal) at a 5% annual rate for 1 year the simple interest calculation is:

I=P r t

$5 = $100 x 5 % x 1 yr

You can as much of a banker as you like.. Simple interest is exactly how I stated it is.. And neither of Peters examples of simple or compound are correct (no offence Peter, easy thing to not know).. So my 'er nope' still stands. Or are you claiming Peter is correct ?? If your going to jump on it, it helps to be right.

When Thais give interest rates they (often / usually) quote simple interest and do not to take into account any of the amortization of the principal.

[LivinLOS]

Banks and building societys in Australia and i expect the UK is the same are honest and explain to people

everything they want to know when applying for a loan

Exactly my point.. In the west theres laws about how they can advertise rates of interest, theres financial ombudsmen to complain to, and citizens rights to help pursue those claims, here my buddy had amounts taken from his bank account and the bank wouldnt even pursue it.

Loans here you cant take the headline %'age rate and assume its how it would apply in the west 3% at simple interest over term is a dam_n sight more than 'our' 3% calculated as the principal is paid down. Thats if they dont outright lie about the rate (heard lost of storys of rates being quoted but the monthly not matching, I dont use credit so I dont know).

Being asia you need to take a calculator and crunch all numbers yourself.. The only way to know is to take full personal responsibility.