DEFINITION of 'Recurring Debt'

Any payment used to service a debt obligation that occurs on a continuing basis. Recurring debt involves payments that cannot be easily canceled at the payer's request, including alimony or child support, and loan payments.

BREAKING DOWN 'Recurring Debt'

Certain bills, such subscriptions, do not count as recurring debts because these payments can be terminated.

An individual's recurring debt is a strong factor when deciding how much of a mortgage loan he or she may obtain. Used in the debt-to-income ratio, lenders compare a borrower's income to the current amount of debt service payments. The concept behind this practice is to determine whether enough income remains, after accounting for recurring debts, to satisfy a mortgage payment.

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RELATED FAQS
  1. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

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  2. What are the main categories of debt?

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  3. How do alimony and child support factor into my taxable income?

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    Your debt-to-income ratio helps lenders determine your credit worthiness. Find out how to calculate your score and whether ... Read Answer >>
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