When faced with a financial crisis such as over-indebtedness, it is important for consumers to understand not only the options available to them for debt relief, but other jargon such as debt services. It is important to understand all of what debt entails, to ensure that consumers are well informed.
Debt services entail the cash that is required for a particular time period to cover the repayment of interest and principal on a debt. Debt service is often calculated on a yearly basis and debt services for an individual often include such financial obligations as a mortgage and student loans.
Companies may have outstanding loans or outstanding interest on bonds or the principal of maturing bonds that count towards the company's debt services. An individual or company that is not able to make payments to service the debt can be said to be over-indebted.
For example, a property developer is said to be "servicing a lot of debt" when he or she has made a large investment in a property and has not yet sold many of the subdivided lots or individual units.
Debt services are simply how much money is owed on a loan, including both the interest and the principal amounts. Individuals seeking loans from banks and other lenders are often required to list their entire debt services (the amount of all outstanding loans and financial obligations) on an income statement (a profit and loss statement).