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Transcript - MedEd Money - Borrowing: How interest rates work


Henry: Hi, I am Henry Annan a final year medical student and I am here with Leah Aulenlach from MD Financial Management.

So, Leah a lot of medical students hear quite a bit about interest rates. What is the most important thing that medical students need to know about interest rates?

Leah: They need to pay attention to the possibility of interest rates rising. We have been in a time for quite awhile with really, really low interest rates but we are slowly starting to see them come up. The reason why that is important is it is going to impact you when it is time to pay it back.

Just as an example, if you owe two hundred thousand dollars on a line of credit, a quarter of a percent increase can be a difference of fifty dollars more per month just in interest costs.

Henry: Wow that adds up really quickly.

Leah: It really does.

Henry: So, you had mentioned when it is time to pay your interest rates. So, when do you have to start paying your interest rates?

Leah: So, on a line of credit we like to encourage you to at least pay some back in residency. That is not always an option, but it is always a good practice and then for student loans on federal portions of your student loans interest starts accumulating upon graduation, but you don’t have to pay it back and then the provincial student loans vary from province to province.

Normally it is no interest until six months but there are some provinces like Alberta and P.E.I. where you actually don’t have to pay the provincial portion of your student loan back until you are done your resident program which is really fantastic.

Henry: Okay, well that is good to know. Thanks Leah!

Leah: You are welcome Henry.