Simulation studies on terahertz (THz) free electron laser (FEL) using a laser modulator and a bunch compressor are reported. The laser modulator for slice energy spread modulation and the momentum compaction factor in the bunch compressor were optimized for higher bunching factor in THz range. Finally, the density-modulated electron beam after the bunch compressor was used for coherent undulator radiation and FEL amplification. In our simulations, electron beam with bunch length of 10 ps, bunch charge of 1 nC, bunching factor of ~0.3, and energy ranging from 35 to 50 MeV was discussed for the THz generation. Tunable frequency ranging from 2 to 10 THz and pulse energy of the order on 100 {um j} will be indicated. Show Partial Abstract