Debt service is the amount required over time to repay debts and consists of:

• Principal & interest
• Lease payments (eg fleet vehicles etc)

When you apply for a loan, the banker is going to ask how you will be able to generate enough income to service the debt.

A lender will only lend money, if they have reasonable expectation that the loan will be repaid.

The Debt Service Ratio is a calculation the lenders use, to see how much more money you can borrow before you are unable to service the monthly installments.

The debt service ratio is defined as net income divided by total debt service.

For example, if your net income is $120,000 p.a and the total debt service is $100 000 p.a, the DSR in this case would equal 1.20x.

A DSR greater 1.0 means there is sufficient cash flow to cover debt service.

A DSR below 1.0 would indicate not enough cash flow to cover the debt.

One way to improve your DSR, would be to consolidate all your loans into one loan that it is easier to service.

If you want to improve your DSR and need help with consolidating loans, credit card debt or anything else, contact us @ propertyloans@realrenta.com to speak with a loan specialist from our trusted Finance Partner.