Debt servicing refers to the process of making payments on a loan or other debt for a particular period of time. It is the amount of cash that is needed to pay back interest and principal amounts on any outstanding debt. Debt servicing can apply to individual debts, such as a home mortgage or student loan, and corporate or government debt, such as business loans and debt-based securities such as bonds. The ability to service debt is a key factor when a person applies for a loan or a company needs to raise additional capital to operate its business.

Debt service can be measured using different ratios, such as the debt service ratio, which is the ratio of debt service payments to export earnings for a country. For companies, the debt service coverage ratio (DSCR) is used to measure their ability to repay their debt. Prospective lenders or bond buyers want to know that a company will be able to cover any new debt on top of its current debt load. To carry a high debt load, a company must generate consistent and reliable profits to service its debts.

Debt servicing is important for both individuals and businesses, as it impacts their ability to receive additional debt in the future. Creditors want to know if a borrower has a solid credit history of servicing debts before they issue another loan. A company that consistently services its debts will have a good credit score, which will boost its reputation for other lenders.

In summary, debt servicing is the process of making payments on a loan or other debt for a particular period of time. It is important for both individuals and businesses, as it impacts their ability to receive additional debt in the future. Different ratios are used to measure debt service for countries and companies.