What is included in debt service?

Debt service refers to the cash required to cover the repayment of interest and principal on a debt for a specific period. This includes both the interest payments, which are the cost of borrowing, and the principal repayments, which reduce the outstanding balance of the debt. It is a critical component for borrowers to understand because it reflects the total financial obligation associated with their outstanding loans.

Choosing cash required for interest and principal repayment accurately captures the complete picture of what debt service entails. This distinguishes it from options that only consider either the interest or the principal separately. By understanding that debt service encompasses all required cash flows related to debt repayment, borrowers can better manage their financial obligations and cash flow planning.