how to check the interest on a loan

[no deal]

hello

i barrow 480000 tb at 5% a year for 3 year,how to make the interest, and i pay 15000 tb every month.

i have been told do 480000 x 15 % maybe this is the thai way,anyone know,in america we dont do like that.

thank you

[Sophon]

I am guessing that you are talking about a car loan? Such loans are (in Thailand) usually stating interest rates using simple interest, which works as you suggest in your post:

Initial loan amount: 480,000 Baht

Interest 480,000 x 3 years x 5% = 72,000 Baht

Total amount to repay: 480,000 Baht + 72,000 Baht = 552,000 Baht

Payment per month: 552,000 Baht / 36 months = 15,333 Baht

As a rule of thumb a stated interest rate calculated with simple interest is the equivalent of almost twice a high interest rate the way most of us are used to see it from back home. So your 5% interest rate is more like 9-10% p.a. Interest rates on motorcycles and used cars in Thailand sound not too bad, but are in reality very high.

Sophon

Edited January 17, 2016 by Sophon

[WhatsNext]

Thats a weird way of advertising, 5% should be 5% over the outstanding amount so your monthly rate for 3 years should be 14,386 Baht.

[gerry123]

Thats a weird way of advertising, 5% should be 5% over the outstanding amount so your monthly rate for 3 years should be 14,386 Baht.

not weird for Thailand we all know what is advertised is far from the actual but thai people don't seem to question it because it is the norm

[marty147]

The Thai method calculates the total interest and loads it onto the front of the loan so in reality, your first 5 monthly repayments would clear the interest before you then start repaying the capital.

That's why some folks are surprised that after making 3 or 4 payments, their outstanding balance is still higher than the original loan amount.

btw - applying the same monthly repayment to a 'Western' loan would give an equivalent interest rate of 9.31%

[Henryford]

The thais don't seem to use the concept of quoting APR as we do in the West just a simple interest figure, most rates are therefore very high, especially for bikes.

[fletchsmile]

You really need to look at the individual loan and get and illustration of the actual payments, as well as the terms and conditions for early repayment

There isn't a single "Thai way" and practices vary. It will depend on the financial institution you borrow from and the type of loan.

eg

1) We had a mortgage with Stan Chart. The interest rate they quoted and applied was on the outstanding balance each day. There were also no penalties for making extra payments, and extra payments would reduce your outstanding and save you interest in the long run.

2) We have a car loan with the leasing arm of the car distributor. The interest rate applied is a simple rate based on the original amount borrowed x number of years of loan. The interest is calculated once at inception. If I paid off the loan early it would still be the same amount of interest, so no interest saving.

To compare the two interest rates, I'd have to approximately double the rate of the second loan.

Cheers

Fletch

[FritsSikkink]

I am guessing that you are talking about a car loan? Such loans are (in Thailand) usually stating interest rates using simple interest, which works as you suggest in your post:

Initial loan amount: 480,000 Baht

Interest 480,000 x 3 years x 5% = 72,000 Baht

Total amount to repay: 480,000 Baht + 72,000 Baht = 552,000 Baht

Payment per month: 552,000 Baht / 36 months = 15,333 Baht

As a rule of thumb a stated interest rate calculated with simple interest is the equivalent of almost twice a high interest rate the way most of us are used to see it from back home. So your 5% interest rate is more like 9-10% p.a. Interest rates on motorcycles and used cars in Thailand sound not too bad, but are in reality very high.

Sophon

15000 x 36 months = 540000. so interest = 540000 - 480000 = 60000

[Sophon]

I am guessing that you are talking about a car loan? Such loans are (in Thailand) usually stating interest rates using simple interest, which works as you suggest in your post:

Initial loan amount: 480,000 Baht

Interest 480,000 x 3 years x 5% = 72,000 Baht

Total amount to repay: 480,000 Baht + 72,000 Baht = 552,000 Baht

Payment per month: 552,000 Baht / 36 months = 15,333 Baht

As a rule of thumb a stated interest rate calculated with simple interest is the equivalent of almost twice a high interest rate the way most of us are used to see it from back home. So your 5% interest rate is more like 9-10% p.a. Interest rates on motorcycles and used cars in Thailand sound not too bad, but are in reality very high.

Sophon

15000 x 36 months = 540000. so interest = 540000 - 480000 = 60000

But then the interest rate wouldn't be 5% but 4,17%. I am assuming that the OP is talking in round numbers when he says he is paying 15,000 Baht per month, it would be very unusual for the loan payment to be a round number such as exactly 15,000 Baht. The bank/finance company starts out with the loan amount and the term of the repayment, so the resulting payment will almost always be an odd amount.

Sophon

Edit: If the OP really is paying exactly 15,000 Baht per month, then he would have to pay for 37 months. So maybe he is rounding down with the payment period rather than the payment amount.

Edited January 19, 2016 by Sophon