Debt Service

AAA

DEFINITION of 'Debt Service'

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."

INVESTOPEDIA EXPLAINS '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. Mortgage

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

    The cancellation or forgiveness of a debt. Debt discharge results ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  5. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  6. Debt-Service Coverage Ratio - DSCR

    In corporate finance, it is the amount of cash flow available ...
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 ...
Related Articles
  1. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  2. 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.
  3. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  4. Budgeting

    Student Debt: Is Bankruptcy The Answer?

    Student loans can be a huge financial burden, but bankruptcy won't necessarily save you from paying.
  5. 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.
  6. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  7. Credit & Loans

    Reverse Mortgages: How To Find A Good One

    Finding a reverse mortgage generally means using a lender that specializes in them. Here's how to find a reputable one.
  8. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  9. Stock Analysis

    How Are Interest Rates Affecting Annaly Cap Mgmt?

    Annaly Capital Management reported a net loss of $658 million thanks to the mortgage REIT's strategy of hedging its exposure to higher interest rates.
  10. Savings

    Mortgage Faceoff: Bank of America Vs. Wells Fargo

    Which bank offers the better mortgage deal? Here's how they compare on two popular types of mortgage.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center