Debt Coverage Ratio (DCR, DSCR)

A ratio that compares the yearly NOI to the yearly loan payments, often used for loan qualification.

Cindy Bellford avatar
Written by Cindy Bellford
Updated over a week ago

What Is It?

A ratio that compares a property's yearly net operating income to its yearly debt service - the total principal and interest payments on the loan.

The debt coverage ratio, sometimes also called the debt service coverage ratio, is often used by lenders to determine loan eligibility.

A debt coverage ratio below 1 indicates that there is not enough cash flow to cover the debt service, and may result in a loan denial.

How Is It Calculated?

Debt coverage ratio formula

You can learn more about the Debt Coverage Ratio on our blog.

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