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Should you choose a fixed interest rate loan for the certainty, or a variable rate loan for the potential savings?
In this Financial Bootcamp episode, Dr. Jim Dahle breaks down the real tradeoffs between fixed and variable rate loans, and how to decide which one fits your situation. He explains how fixed rates protect you from interest rate risk at a cost, while variable rates typically start lower but expose you to the possibility of rising payments over time.
Jim walks through how to evaluate the worst case scenario on a variable rate loan, including rate caps and adjustment limits, and why that worst case, not the starting rate, should drive your decision. He applies this framework across student loans, mortgages, and car loans, and explains why fixed rates tend to make more sense for long-term obligations like a 30-year mortgage, while variable rates and adjustable rate mortgages can make sense if you know you won't hold the loan for long.
He also revisits 2022, when interest rates rose about 4% in roughly six months, one of the fastest rate increases in U.S. history, and what happened to borrowers and investors who had taken on too much variable rate risk without planning for it.
The right loan structure isn't about picking whichever one has a better reputation. It's about understanding the real cost, running the worst case scenario, and matching the loan to your own financial plan and risk tolerance.
We know finances can be complicated, especially when you are just beginning your journey to financial literacy. When you listen to the Financial Boot Camp Podcast, you'll learn the basics of money: how to earn more of it, how to save more of it, how and why to invest more of it, and yes, how to safely spend more of it. Consider the Financial Boot Camp Podcast your weekly Finance 101 class, designed to teach you what they didn't teach you in medical school or residency.
Whether you need to learn about disability insurance, the best way to negotiate a physician contract, or how to do a Backdoor Roth IRA, the Financial Boot Camp Podcast covers the basics. Every Tuesday, we publish an episode designed to get you comfortable with financial terms and concepts you need to know as you begin your journey to financial freedom. Best of all, Financial Boot Camp is completely free.
Most doctors and high earners never learned about money. They weren't taught the best ways to pay off debt, build wealth, and retire comfortably with enough money to support the life they want. That's our main goal: teaching people about money and finances, and showing how smart financial decisions can help create a better life.
We've been helping people make smart decisions about their money since 2011. We want to help you too, by giving you the knowledge and tools to build a plan and enjoy the financial freedom you deserve.
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