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?

    It's important to know your debt-to-income ratio because it's the figure lenders use to measure your ability to repay the ... Read Answer >>
  2. How do I lower my debt-to-income (DTI) ratio?

    A debt-to-income ratio is a personal finance measure that compares the amount of debt you have to your overall income. Lenders ... Read Answer >>
  3. What is the difference between the debt ratio of a company and the debt ratio of ...

    Discover the different financial evaluation measures that are most commonly applied to individuals and corporations, respectively. Read Answer >>
  4. How do alimony and child support factor into my taxable income?

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