Debt Service

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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."

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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).

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RELATED FAQS
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