What are debt cushion?

A debt cushion refers to the extra capacity a borrower has to manage their debt obligations without defaulting. It can be measured by the difference between a borrower’s income and their debt payments, providing a buffer during financial stress. A larger debt cushion indicates a stronger ability to handle unexpected expenses or income fluctuations, while a smaller cushion suggests higher financial risk. Maintaining a healthy debt cushion is essential for financial stability and resilience.