The phrase "ability to repay interest" is correct and usable in written English.
It can be used in financial contexts, particularly when discussing loans, credit, or financial assessments of individuals or entities.
Example: "Before approving the loan, the bank must evaluate the applicant's ability to repay interest on the borrowed amount."
Alternatives: "capacity to pay interest" or "potential to service interest".
In a September 2000 filing with the S.E.C., Metropolitan stated that its ability to repay interest and principal on debt securities and preferred stock dividends depended in part on "the success of future public or private offerings of debt and equity securities".
Strategy 2: Target Debt Levels A more consistent approach is to maintain a manageable level of debt based on the ability to repay interest.
Let's take a look at three strategies that could help avoid this scenario: Strategy 1: Maintaining Constant Leverage Clearly, in the previous example, the investor didn't manage his or her ability to repay interest or the potential losses.
New mortgage rules mean banks must quiz customers about their ability to repay if interest rates go up.
Nevertheless, bond market pressure is likely to be fierce, with investors fleeing the debt of peripheral euro-zone governments because of worries about their ability to repay as interest rates rise, and because of fears of write-downs for bondholders.
One reason for this is that a lender has to "stress test" a customer's ability to repay if interest rates were to rise.
For example, an investor with $25,000 on hand determines that $100,000 is a manageable level of debt given her income and her ability to repay the interest.
Lenders are already using new affordability checks - known as the Mortgage Market Review - which test people's ability to repay were interest rates to rise.
Nor does the creation of money by commercial banks through lending require any faith other than in the borrower's ability to repay the loan with interest when it is due.
Debt-service coverage ratio, which shows a firm's ongoing ability to repay both principal and interest on loans, was 4.39, on average - the highest since 2006, according to Sageworks' data.
Borrowers are routinely lent money without having their ability to repay properly assessed, at annualised interest rates of more than 4,000%.
