In the example of returning $5,000 (10% of income) every year is only an informal way of saying. It ignores the interest that is payable on the capital borrowed. This actually means that the interest is not much and can be paid easily from our earnings or savings. One will get into a financial trouble, if this money is not planned for.

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If only $5,000 is paid every year, then the interest accumulates and will become a huge amount in 10 years.

Accumulated interest at end of 10 yrs = $ 46,534.50 at 6.8% per annum

Accumulated interest at end of 10 yrs = $ 63,049.17 at 8.5% per annum

This is much more than the amount borrowed.

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If $ 50, 000 is borrowed for 10 years then one has to pay back $50,000 / 10 = $5,000 as an installment every year (called EMI) and also, the interest accrued on the balance amount still unpaid.

So at the end of 1st year of taking loan, you pay 1/10th capital + interest for $50,000 at 6.8%,

= $5,000 + $3,400 = $ 8,400

At end of 2nd year you pay 1/10 th capital + interest for $ 45,000 at 6.8%

= $ 5,000 + $3,060 = $ 8,060

At the end of 3rd year: $ 7,720

At the end of 10th year : $ $ 5,340

So every year we have to pay more amount than $5,000

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if the interest rate is 8.5%, then

At the end of 1st year of taking the loan, you pay $5000+ $ 4,250 = $9,250.

It is substantially larger than $ 5,000.