Debt Service

Loading the player...

What is 'Debt Service'

Debt service is the cash that is required for a particular time period to cover the repayment of interest and principal on a debt. Debt service is often calculated on a yearly basis. Debt service for an individual often includes such financial obligations as a mortgage and student loans. Companies may have outstanding loans or outstanding interest on bonds or the principal of maturing bonds that count towards the company's debt service. An individual or company that is not able to make payments to service the debt can be said to be "unable to service (his/her/its) debt."

BREAKING DOWN 'Debt Service'

For example, a property developer is said to be "servicing a lot of debt" when he or she has made a large investment in a property and has not yet sold many of the subdivided lots or individual units. The debt service is simply how much money is owed on a loan, including both the interest and the principal amounts. Individuals seeking loans from banks and other lenders are often required to list their entire debt service (the amount of all outstanding loans and financial obligations) on an income statement (a profit and loss statement).

RELATED TERMS
  1. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  2. Debt-Service Coverage Ratio (DSCR)

    In corporate finance, the Debt-Service Coverage Ratio (DSCR) ...
  3. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  4. Debt Discharge

    The cancellation or forgiveness of a debt. Debt discharge results ...
  5. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  6. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
Related Articles
  1. Stock Analysis

    Is it too Late to Invest in Synergy Pharmaceuticals? (SGYP)

    Discover an upstart biotechnology stock trading near its 52-week low with a promising pipeline drug that may gain FDA approval by late 2016.
  2. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  3. Stock Analysis

    Roche Stock: A Dividend Analysis

    Learn about Roche's financial strength via an examination of its financial statements, and discover the security of the company's annual dividend going forward.
  4. Stock Analysis

    The Biggest Risks of Investing in Seadrill Stock (SDRL)

    Learn about some of the major risks of investing in Seadrill. Discover why the company is at risk for lower revenues due to falling prices for oil.
  5. Economics

    Explaining Debt Service

    Debt service is a measure of a person or entity’s use of cash to pay interest and principal on debt obligations.
  6. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  7. Credit & Loans

    How To Read Loan And Credit Card Agreements

    The devil is always in the details! Find out what you're signing yourself up for.
  8. Budgeting

    Student Debt: Is Bankruptcy The Answer?

    Student loans can be a huge financial burden, but bankruptcy won't necessarily save you from paying.
  9. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  10. Home & Auto

    Where Rents Are Rising Most (Or Not So Much)

    If you’re in the market for rental housing, rents are rising more slowly in major metro areas; secondary-market rents, however, are growing faster.
RELATED FAQS
  1. How do you use Excel to calculate a debt service coverage ratio (DSCR)?

    Find out how to calculate a company's debt service coverage ratio, or DSCR, in Microsoft Excel, and learn where to locate ... Read Answer >>
  2. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  3. How can I budget for both short-term expenses and long-term goals?

    The first step in planning for long-term goals is actually determining how much you spend on short-term expenses. Once you ... Read Answer >>
  4. What's the difference between short sales and foreclosures?

    Understand the difference between a short sale and a foreclosure; both result in the loss of a home, either through a sale ... Read Answer >>
  5. How do you use the FNMA selling guide?

    Learn about Fannie Mae Selling Guide and find out details about how its parts provide support to the business relationship ... Read Answer >>
  6. What is a good debt ratio, and what is a bad debt ratio?

    Learn about the factors that influence how investors and lenders evaluate the debt ratio for a company and why the answer ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center