DSCR Loan Canada Calculator - Calculate Debt Service Coverage Ratio

If you’re considering applying for a loan in Canada, understanding your debt service coverage ratio (DSCR) is crucial. The DSCR Loan Canada Calculator is a helpful tool that can assist you in calculating this important metric. The DSCR measures your ability to repay a loan by comparing your net operating income to your debt obligations.

Using the DSCR Loan Canada Calculator is simple. Input your total annual net operating income and your total annual debt obligations, and the calculator will provide you with your DSCR. This ratio is expressed as a number, with higher numbers indicating a higher ability to handle debt. A DSCR of 1 or higher is typically required by lenders to qualify for a loan.

Calculating your DSCR is an important step in the loan application process. It allows you to assess your financial health and determines your eligibility for a loan. By using the DSCR Loan Canada Calculator, you can gain a better understanding of your financial position and make more informed decisions when it comes to borrowing.

Don’t proceed with your loan application without understanding your DSCR. Use the DSCR Loan Canada Calculator today to calculate your Debt Service Coverage Ratio and ensure you’re on the right track to securing the loan you need.

What is DSCR Loan?

A DSCR loan is a type of loan that is used to calculate the Debt Service Coverage Ratio (DSCR). The DSCR is a financial metric that lenders use to assess the ability of a borrower to repay their debt obligations.

The DSCR is calculated by dividing the borrower’s net operating income by their total debt service. The net operating income is the income generated by the borrower’s business or investment property, while the total debt service is the total amount of principal and interest payments on all of the borrower’s outstanding loans.

The DSCR loan calculator is a tool that allows borrowers to determine their DSCR and assess their borrowing capacity. By inputting their net operating income and total debt service, borrowers can calculate their DSCR and understand whether they meet the lender’s requirements for loan approval.

In Canada, DSCR loans are commonly used by small business owners and real estate investors. Lenders typically require borrowers to have a DSCR of at least 1.20, meaning that their net operating income is 1.20 times higher than their total debt service. This ensures that borrowers have sufficient cash flow to cover their debt obligations and reduces the risk of default.

Key Features of DSCR Loan:

DSCR loans are specifically designed to assess the borrower’s ability to repay their debts.
The DSCR is calculated by dividing the net operating income by the total debt service.
The DSCR loan calculator helps borrowers determine their borrowing capacity.
In Canada, lenders typically require a DSCR of at least 1.20 for loan approval.

Benefits of DSCR Loan:

Allows borrowers to assess their ability to repay debt obligations.
Can help borrowers determine their borrowing capacity.
Reduces the risk of default for lenders.
Commonly used by small business owners and real estate investors in Canada.

How Does DSCR Loan Work?

A DSCR loan refers to a loan that is based on the Debt Service Coverage Ratio (DSCR), which is a financial metric used by lenders in Canada to assess the borrower’s ability to repay the loan. The DSCR loan calculator is a tool that helps borrowers determine their DSCR, which in turn helps them understand their ability to meet the debt service requirements of the loan.

When applying for a DSCR loan in Canada, borrowers are required to provide information about their income, expenses, and existing debt obligations. This information is used to calculate the DSCR, which is calculated by dividing the borrower’s net operating income by the total debt service. The net operating income is a measure of the borrower’s ability to generate income from their assets, while the total debt service includes all mortgage payments, interest, and other debt obligations.

The DSCR is expressed as a ratio, with a higher ratio indicating a greater ability to cover the loan payments. Lenders usually require borrowers to have a minimum DSCR ratio of 1.25 or higher, indicating that the borrower’s income is at least 25% more than their debt service obligations. This provides a cushion for unexpected expenses or changes in income.

Once the DSCR is calculated, lenders use this information to determine the loan amount and interest rate that the borrower qualifies for. A higher DSCR ratio often results in a higher loan amount and a lower interest rate, as the borrower is seen as less risky and more likely to repay the loan. Conversely, a lower DSCR ratio may result in a lower loan amount or a higher interest rate, as the borrower’s ability to repay the loan may be considered less certain.

In summary, a DSCR loan is a loan that is based on the Debt Service Coverage Ratio, which is a measure of the borrower’s ability to meet their loan obligations. The DSCR loan calculator is a tool that helps borrowers understand their DSCR and determine their eligibility for a loan. By providing information about their income, expenses, and existing debt obligations, borrowers can use the calculator to assess their ability to repay the loan and understand the loan terms and conditions offered by lenders in Canada.

Why is DSCR Loan Important?

The DSCR loan calculator in Canada is an essential tool for determining the debt service coverage ratio (DSCR). DSCR is a financial metric that lenders use to assess a borrower’s ability to generate enough cash flow to cover their debt obligations.

Calculating the DSCR is crucial for both lenders and borrowers. Lenders utilize it to evaluate the creditworthiness and risk associated with lending to a borrower. By analyzing the DSCR, lenders can determine if the borrower has enough income to make timely loan payments and meet other financial commitments.

On the other hand, borrowers can also benefit greatly from understanding their DSCR. By calculating this ratio, borrowers can assess their financial health and determine how much debt they can comfortably take on. Knowing their DSCR can help borrowers make informed decisions about borrowing and ensure they do not overextend themselves financially.

The DSCR loan calculator streamlines the process of calculating this ratio, making it quick and convenient for both lenders and borrowers. By inputting relevant financial information such as net operating income and debt payments, the calculator can provide an accurate DSCR calculation in seconds.

Overall, the DSCR loan calculator is a valuable tool that helps lenders and borrowers assess the financial viability of a loan. Whether you are a lender looking to evaluate a borrower’s creditworthiness or a borrower aiming to make informed borrowing decisions, understanding the DSCR is crucial for a successful loan experience.

How to Calculate Debt Service Coverage Ratio?

The Debt Service Coverage Ratio (DSCR) is a measure of a borrower’s ability to cover their loan payments. It is commonly used by lenders to assess the financial health and repayment capacity of a borrower. Calculating the DSCR helps determine if the borrower has sufficient cash flow to meet their debt obligations.

Step 1: Gather the necessary information

To calculate the DSCR, you will need the following information:

The borrower’s net operating income (NOI)
The borrower’s total debt service (TDS)

Step 2: Calculate the Debt Service Coverage Ratio

The formula for calculating the DSCR is:

DSCR = NOI / TDS

Divide the borrower’s NOI by their TDS to calculate the DSCR. The result will be a numerical value.

Step 3: Interpret the DSCR

After calculating the DSCR, you can interpret the result to assess the borrower’s ability to cover their loan payments. A DSCR value of 1 or above indicates that the borrower has sufficient cash flow to meet their debt obligations. A DSCR value below 1 suggests that the borrower may have difficulty repaying the loan and may be at a higher risk of default.

It’s important to note that lenders may have different criteria for acceptable DSCR values. Some lenders require a higher DSCR to mitigate risk and ensure the borrower’s financial stability.

Calculating the DSCR is an essential step in analyzing loan applications and making informed lending decisions. By assessing the borrower’s ability to generate sufficient cash flow, lenders can minimize the risk of default and protect their investments.

What is the Formula for DSCR?

The Debt Service Coverage Ratio (DSCR) is a financial metric used by lenders to assess a borrower’s ability to repay a loan. It is calculated by dividing the net operating income (NOI) by the debt service payment. The DSCR formula is as follows:

DSCR =	Net Operating Income (NOI)	Debt Service Payment

The net operating income is the income generated from a property after subtracting operating expenses, while the debt service payment is the amount required to service the loan, including principal and interest payments. The DSCR ratio provides an indication of whether the property’s cash flow is sufficient to cover its debt obligations.

Using a DSCR loan calculator can simplify the calculation process and assist borrowers in determining their borrowing capacity. By inputting the property’s income and expenses, as well as the loan details, the calculator automatically computes the DSCR ratio, enabling borrowers to assess their ability to obtain financing.

What is the Ideal DSCR Ratio for a Loan?

The Debt Service Coverage Ratio (DSCR) is a financial metric used by lenders to assess the ability of a borrower to repay a loan. In Canada, DSCR is an important factor in determining the eligibility and terms of a loan.

The ideal DSCR ratio for a loan is typically considered to be 1.25 or higher. This means that the borrower’s net operating income (NOI) should be 1.25 times greater than the total debt service payments on the loan. A higher DSCR ratio indicates a lower level of risk for the lender, as it shows that the borrower has a strong ability to cover their loan obligations.

Having a DSCR ratio of 1.25 or higher is important for various reasons. Firstly, it provides a cushion for unexpected expenses or fluctuations in income, allowing the borrower to still meet their loan payments even in challenging situations. Additionally, a higher DSCR ratio demonstrates the borrower’s financial stability, which can result in more favorable loan terms, such as lower interest rates and longer repayment periods.

However, it’s important to note that the ideal DSCR ratio can vary depending on the specific industry or type of loan. Lenders may have different thresholds for different types of loans, taking into account factors such as the borrower’s creditworthiness, the collateral provided, and the overall risk associated with the loan.

In conclusion, while the ideal DSCR ratio for a loan is generally considered to be 1.25 or higher in Canada, it’s crucial to understand that lenders may have their own specific requirements. It’s always advisable for borrowers to consult with lenders or financial professionals to determine the ideal DSCR ratio for their specific loan needs.

How to Use a DSCR Loan Canada Calculator?

Using a DSCR Loan Canada Calculator is a simple and efficient way to calculate your Debt Service Coverage Ratio (DSCR) for a loan in Canada. The calculator helps you determine your ability to repay the loan by comparing your net operating income to your loan payments.

Step 1: Enter Loan Details

Start by entering the necessary loan details. This includes the loan amount, interest rate, loan term, and any additional fees or costs associated with the loan. Make sure to input accurate information in order to obtain an accurate DSCR calculation.

Step 2: Enter Income and Expense Figures

Next, you will need to enter your income and expense figures. This includes your total net operating income (NOI), which is the income generated from the property or business that the loan is for. Additionally, input any regular expenses such as property taxes, insurance, utilities, and other operating costs.

Step 3: Review the Results

After inputting all the necessary information, the DSCR Loan Canada Calculator will provide you with the Debt Service Coverage Ratio (DSCR). This ratio represents the ability of your income to cover the loan payments. A DSCR above 1 indicates that your income is sufficient to cover your loan obligations, while a DSCR below 1 may suggest a higher risk of default.

You can also review the breakdown of your income and expenses in the form of a table, which can help you further analyze your financial situation and make informed decisions regarding the loan.

Using a DSCR Loan Canada Calculator can save you time and effort in manually calculating your DSCR. It allows you to quickly assess your loan suitability and make informed decisions about your financial future. Remember, it’s always recommended to consult with a financial advisor or mortgage specialist for personalized guidance and advice.

Loan Details
Loan Amount
Interest Rate
Loan Term
Additional Fees/Costs
Income and Expenses
Net Operating Income (NOI)
Property Taxes
Insurance
Utilities
Other Operating Costs

Benefits of Using a DSCR Loan Calculator

A DSCR loan calculator can be a valuable tool for borrowers in Canada who are considering applying for a loan. Here are some of the key benefits of using a DSCR loan calculator:

Accuracy:	By using a DSCR loan calculator, borrowers can ensure that they have accurate calculations of their Debt Service Coverage Ratio (DSCR). This ratio is a key metric used by lenders to assess a borrower’s ability to repay a loan. Having accurate calculations can give borrowers confidence in their loan application.
Efficiency:	Calculating a DSCR manually can be time-consuming and potentially prone to errors. Using a DSCR loan calculator streamlines the process and provides instant results. This allows borrowers to quickly evaluate their financial situation and make informed decisions about their loan options.
Exploration of Different Scenarios:	With a DSCR loan calculator, borrowers can easily adjust the inputs, such as income and expenses, to explore various scenarios. This can help borrowers understand how changes in their financial situation could impact their DSCR and loan eligibility. It allows borrowers to consider different strategies and make informed decisions about loan terms.
Comparison of Loan Options:	A DSCR loan calculator also allows borrowers to compare different loan options. By inputting the terms of each loan, borrowers can see how they stack up in terms of DSCR and overall affordability. This enables borrowers to choose the loan that best fits their financial goals and maximizes their chances of loan approval.
Educational Tool:	Finally, a DSCR loan calculator can serve as an educational tool for borrowers. It helps borrowers understand the concept of DSCR and its significance in loan applications. By using the calculator and experimenting with different inputs, borrowers can gain a better understanding of how DSCR affects loan eligibility and repayment capacity.

In conclusion, a DSCR loan calculator is a valuable tool for borrowers in Canada. It provides accurate and efficient calculations of DSCR, allows borrowers to explore different scenarios, compare loan options, and serves as an educational tool. By using a DSCR loan calculator, borrowers can make informed decisions about their loan applications and increase their chances of loan approval.

Tips for Using a DSCR Loan Calculator

Using a DSCR loan calculator can be an effective way to determine your debt service coverage ratio and assess your ability to obtain a loan. Here are some useful tips to keep in mind when using a DSCR loan calculator in Canada:

1. Gather your financial information:	Before using the DSCR loan calculator, make sure you have all the necessary financial information handy. This includes your annual income, monthly expenses, and any existing debt obligations.
2. Input accurate data:	It is important to provide accurate and up-to-date information when using the DSCR loan calculator. This ensures that the results are reliable and reflect your true financial situation.
3. Consider different scenarios:	Use the DSCR loan calculator to assess different borrowing scenarios. Adjust the loan amount, interest rate, and repayment term to see how these factors impact your debt service coverage ratio.
4. Understand the DSCR:	Make sure you understand the concept and importance of the debt service coverage ratio. This ratio measures your ability to repay debt and is a key consideration for lenders when approving loans.
5. Seek professional advice:	If you have any questions or concerns about using the DSCR loan calculator or interpreting the results, consider consulting a financial advisor or mortgage professional. They can provide personalized guidance based on your unique financial situation.

By following these tips, you can effectively use a DSCR loan calculator in Canada to determine your debt service coverage ratio and make informed borrowing decisions.

Factors That Affect DSCR Ratio

The Debt Service Coverage Ratio (DSCR) is a financial metric used by lenders to evaluate the viability of a loan. It measures the borrower’s ability to generate enough operating income to cover the loan payments. Several factors can influence the DSCR ratio in Canada.

Income Stability

Stable and predictable income is an essential factor in determining the DSCR ratio. Lenders prefer borrowers with a consistent income stream that is likely to continue in the future. This stability ensures that the borrower can meet their loan obligations without financial hardship.

Loan Terms

The terms of the loan, including the interest rate and repayment schedule, can impact the DSCR ratio. Higher interest rates or shorter repayment periods can increase the loan payments, making it more challenging for borrowers to maintain a high DSCR ratio. Conversely, lower interest rates or longer repayment periods may improve the DSCR ratio.

Operating Expenses

The operating expenses of the borrower, such as salaries, utilities, and maintenance costs, can affect the DSCR ratio. Higher operating expenses reduce the net operating income available for loan payments, which can lower the DSCR ratio. It is essential for borrowers to manage their expenses effectively to maintain a healthy DSCR ratio.

Other factors that may influence the DSCR ratio include the borrower’s credit history, the amount of the loan, and the type of property being financed. It is important for borrowers in Canada to consider these factors and strive to maintain a favorable DSCR ratio to improve their chances of obtaining financing.

Common Mistakes to Avoid When Calculating DSCR Ratio

When calculating the Debt Service Coverage Ratio (DSCR) for a loan, it is important to be accurate in your calculations to ensure you have a clear understanding of the borrower’s ability to meet their debt obligations. However, there are some common mistakes that can be made when calculating the DSCR ratio. Here are a few mistakes to avoid:

Using the wrong formula: The DSCR ratio is calculated by dividing the borrower’s net operating income by their total debt service. Using the wrong formula or substituting incorrect figures can result in an inaccurate DSCR ratio.
Not considering all relevant expenses: When calculating the net operating income, it is important to consider all relevant expenses and not just the borrower’s gross income. Some common expenses to consider include property taxes, insurance, and maintenance costs.
Not factoring in vacancy rates: If the borrower’s property or business is subject to vacancy rates, it is important to factor in these rates when calculating the DSCR ratio. Failure to do so can result in an inflated DSCR ratio that does not accurately reflect the borrower’s ability to meet their debt obligations.
Using outdated or incorrect financial statements: When calculating the DSCR ratio, it is important to use current and accurate financial statements. Using outdated or incorrect financial statements can lead to an inaccurate DSCR ratio and an incomplete understanding of the borrower’s financial situation.
Ignoring future changes or uncertainties: The DSCR ratio is a snapshot of the borrower’s current financial situation, but it is also important to consider future changes or uncertainties that may impact their ability to meet their debt obligations. Ignoring these factors can lead to an inaccurate DSCR ratio and an incomplete assessment of the borrower’s risk.

By avoiding these common mistakes when calculating the DSCR ratio, you can ensure that you have an accurate assessment of the borrower’s ability to meet their debt obligations, making informed decisions when it comes to loan calculations in Canada.

How to Improve DSCR Ratio?

When it comes to managing your loan and maintaining a healthy Debt Service Coverage Ratio (DSCR) in Canada, there are several steps you can take to improve your ratio and increase your chances of securing a loan. Here are some strategies to consider:

Increase your cash flow: One of the most effective ways to improve your DSCR is by increasing your cash inflow. This can be achieved by boosting sales, increasing rental income, or finding other ways to generate additional revenue. By increasing your cash flow, you’ll have more money available to cover your debt service obligations.
Reduce your expenses: Another way to improve your DSCR is by reducing your expenses. Look for opportunities to cut costs, negotiate better deals with suppliers, or find ways to streamline your operations. By reducing your expenses, you’ll have more income available to meet your debt service requirements.
Pay down existing debt: If you have existing debt, consider making extra payments to pay it off faster. By reducing your outstanding debt, you’ll lower your debt service obligations and improve your DSCR. This can be achieved by allocating any extra cash flow or profits towards debt repayment.
Improve your credit score: A higher credit score can make it easier to secure a loan and improve your DSCR. Take steps to improve your credit score by making all your payments on time, reducing your credit card balances, and resolving any outstanding issues on your credit report.
Seek professional advice: If you’re struggling to improve your DSCR or need help managing your loan, consider seeking advice from a financial professional or a loan specialist. They can provide valuable insights and guidance tailored to your specific situation.

By implementing these strategies and staying proactive in managing your loan, you can significantly improve your DSCR ratio and increase your chances of securing a loan in Canada.

When to Use a DSCR Loan?

A DSCR (Debt Service Coverage Ratio) loan is a financial tool that is typically used by Canadian businesses and real estate investors to assess their ability to meet their debt obligations. Here are some situations where a DSCR loan can be beneficial:

Real Estate Investment: If you are planning to invest in real estate in Canada, a DSCR loan can help you determine the feasibility of your investment. By calculating the debt service coverage ratio, you can assess whether the rental income generated by the property will be sufficient to cover the mortgage payments.
Business Expansion: If you own a business in Canada and are planning to expand, a DSCR loan can help you assess whether your business’s cash flow is strong enough to cover the additional debt that will be incurred during the expansion. This can give you a better understanding of the financial feasibility of your expansion plans.
Refinancing: If you have an existing loan and are considering refinancing, a DSCR loan can help you determine whether the new loan terms will be favorable for your financial situation. By calculating the debt service coverage ratio, you can assess whether the new loan payments will be manageable and if the refinancing will provide any financial benefits.
Acquiring a Business: If you are planning to acquire an existing business in Canada, a DSCR loan can help you evaluate the financial health of the business. By calculating the debt service coverage ratio, you can assess whether the business generates enough cash flow to cover its existing debt obligations and determine the level of risk involved in the acquisition.

Overall, a DSCR loan calculator can be a valuable tool for Canadian businesses and real estate investors to make informed financial decisions. By calculating the debt service coverage ratio, you can assess the feasibility of your plans and determine whether taking on additional debt is a sensible option.

Example of DSCR Loan Calculation

To understand how the DSCR loan calculator works, let’s consider an example:

Company XYZ is looking to borrow a loan of $500,000 to expand its business operations. The bank offers an interest rate of 5% per annum on a term loan with a repayment period of 5 years. The company’s net operating income (NOI) is $150,000.

Using the DSCR loan calculator, we can calculate the debt service coverage ratio (DSCR) by dividing the NOI by the annual debt service (ADS).

First, we need to calculate the annual debt service, which is the total amount of principal and interest payments for the loan. We can use the standard loan amortization formula to calculate the annual payment:

Loan Payment = Loan Amount x (Interest Rate / (1 – (1 + Interest Rate)^(-Term)))

Using the provided values:

Loan Amount = $500,000

Interest Rate = 5% per annum

Term = 5 years

Substituting the values into the formula, we get:

Loan Payment = $500,000 x (0.05 / (1 – (1 + 0.05)^(-5)))

Loan Payment = $500,000 x (0.05 / (1 – 0.7355))

Loan Payment = $500,000 x (0.05 / 0.2645)

Loan Payment = $500,000 x 0.1889

Loan Payment ≈ $94,458

Next, we can calculate the DSCR by dividing the NOI by the annual debt service:

DSCR = NOI / ADS

DSCR = $150,000 / $94,458

DSCR ≈ 1.59

With a DSCR of 1.59, Company XYZ will be able to cover its debt obligations with its net operating income. This indicates that the company is financially capable of servicing the loan.

This example demonstrates how the DSCR loan calculator can be used to assess the financial feasibility of a loan and evaluate a company’s ability to repay its debt obligations.

FAQs

Here are some frequently asked questions about the DSCR Loan Canada Calculator:

1. What is the DSCR Loan Canada Calculator?

The DSCR Loan Canada Calculator is a tool that allows you to calculate the Debt Service Coverage Ratio (DSCR) for a loan in Canada. The DSCR is a measure of a borrower’s ability to repay a loan, and it is calculated by dividing the borrower’s net operating income by their total debt service.

2. How does the calculator work?

To use the DSCR Loan Canada Calculator, you will need to input the borrower’s total annual net operating income and their total debt service. The calculator will then calculate the DSCR and provide you with the ratio as well as a determination of whether the borrower meets the lender’s minimum requirement.

3. Why is the DSCR important?

The DSCR is an important metric for lenders as it helps them assess the risk of a loan. A higher DSCR indicates that the borrower has a better ability to repay their loan, while a lower DSCR indicates a higher risk of default. Lenders typically have a minimum DSCR requirement that borrowers must meet in order to qualify for a loan.

4. What is considered a good DSCR?

A DSCR of 1.0 is considered the minimum acceptable ratio, as it indicates that the borrower is generating enough income to cover their debt service. However, many lenders prefer to see a DSCR of 1.25 or higher, as it provides a greater margin of safety and reduces the risk of default.

5. Can the DSCR Loan Canada Calculator be used for personal loans?

No, the DSCR Loan Canada Calculator is primarily designed for commercial loans. Personal loans typically do not require a DSCR calculation as they are generally based on a borrower’s creditworthiness and ability to make monthly payments.

6. Is the DSCR Loan Canada Calculator accurate?

The DSCR Loan Canada Calculator provides a reliable estimate of the borrower’s Debt Service Coverage Ratio based on the information provided. However, it is important to note that the calculator is only a tool and should be used in conjunction with other financial analysis methods to make informed lending decisions.

Question-Answer:

What is the DSCR loan Canada calculator?

The DSCR loan Canada calculator is a tool that helps borrowers calculate their Debt Service Coverage Ratio (DSCR) for a loan in Canada.

How does the DSCR loan Canada calculator work?

The DSCR loan Canada calculator works by inputting the borrower’s monthly income, monthly expenses, and the monthly mortgage payment. It then calculates the DSCR by dividing the monthly income by the sum of the monthly expenses and the monthly mortgage payment.

Why is the DSCR important for a loan in Canada?

The DSCR is important for a loan in Canada as it provides an indication of the borrower’s ability to cover the loan payments. Lenders typically require a minimum DSCR to qualify for a loan, as it ensures that the borrower can meet their financial obligations.

What is a good DSCR ratio for a loan in Canada?

A good DSCR ratio for a loan in Canada is typically considered to be above 1.25. This means that the borrower’s income is 1.25 times the amount of their monthly expenses and mortgage payment, providing a comfortable margin for loan repayment.

Can the DSCR loan Canada calculator be used for other countries?

No, the DSCR loan Canada calculator is specifically designed for calculating the Debt Service Coverage Ratio for loans in Canada. Other countries may have different loan requirements and calculations.

What is the DSCR loan Canada calculator?

The DSCR loan Canada calculator is a tool used to calculate the Debt Service Coverage Ratio (DSCR) for loans in Canada. It helps borrowers determine if they have enough income to cover their monthly loan payments.

How does the DSCR loan Canada calculator work?

The DSCR loan Canada calculator works by taking the borrower’s annual net operating income and dividing it by the annual debt service. The result is the DSCR, which indicates the borrower’s ability to cover their debt obligations. A higher DSCR indicates a lower risk for lenders.

Why is the DSCR important for lenders?

The DSCR is important for lenders because it helps them assess the borrower’s ability to repay the loan. Lenders want to ensure that borrowers have enough income to cover their debt obligations, and a higher DSCR indicates a lower risk for lenders. A low DSCR may result in higher interest rates or loan denial.