Interest payments are the amounts municipalities pay to lenders as the cost of borrowing money. When municipalities issue debentures or take loans for capital projects, they commit to regular interest payments (usually semi-annually or annually) until the debt matures. Interest represents a fixed budget commitment—payments must be made regardless of other fiscal pressures. Total interest costs depend on the amount borrowed, interest rate, and loan term. Lower interest rates and shorter terms reduce total interest but increase annual payment amounts. Municipal credit ratings affect interest rates—higher-rated municipalities borrow at lower rates. Interest payments are separate from principal repayments, which reduce the outstanding debt balance. Together, interest and principal payments constitute debt servicing costs. Provincial regulations typically limit debt servicing costs as a percentage of revenue to ensure municipalities maintain capacity to fund ongoing services. Minimizing interest costs through careful borrowing timing and maintaining good credit ratings saves taxpayer money.