Expert: JT Holt - 10/29/2009

Question
I am in Thailand so the currency is different however I assume the principles are similar. If someone wanted to borrow 1,000,000 at 10% interest for 10 years how would you calculate interest and principle for the period of 10 years


Answer
This would depend upon whether the borrower is making equal principal payments or whether it is a standard amortization.  With equal principal payments you would divide the $1MM by 10 years to get the principal portion of the payment, which would stay equal for the entire 10 years = $100,000.  Then take the percentage rate of 10% times the principal balance $1MM = $100,000 then add the two = $200,000.  The 2nd year of this amortization the payment would be $100,000 principal and $90,000 interest = $190,000.  Difference is due to the second payment the borrower is paying interest on $900,000.
With a standard amortization it is recommended to utilize a financial calculator or amortization schedule.  You can find a loan payment calculator on our website at:  http://www.landloanspecialists.com/Land-Loan-Payment-Calculator.html  I hope this calculator is helpful for you.
Best of luck to you!
JT Holt
Land Loan Specialists.com