The cost of debt capital is the interest to be paid to its owner.Cost of Debt Capital Definition
Cost of Debt Capital FAQs
The cost of debt capital is the interest to be paid to its owner.
It is important because it represents a sunk cost that must be repaid in order to maintain access to the funds borrowed. It also affects a company's profitability and financial stability.
This can include interest on a car loan, credit card debt or even mortgage debt.
The lender calculates this number after determining if it will make money by lending to you. The entity receiving the loan pays the cost of debt capital.
One way to lower the cost of debt capital is to get a better interest rate. Another way is to reduce the amount of risk associated with the loan. This can be done by improving your credit score or pledging collateral.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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