How to use Debt Analysis

RightCapital provides deep insight into a client's financial landscape, debt included.

To access the Debt tool, navigate to the client, then select Dashboard > Debt to view a detailed analysis of debt prospects for a client's plan.

There are three tabs under Debt: Strategy, Payment, and Details. All three tabs are covered here; let's jump in!

Strategy sub-tab

The Strategy tab evaluates clients' debt and looks at different approaches to getting that debt paid off.

The chart shows all the debts that have selected a strategy other than "Keep current payment" in the "Individual loan strategy" section of the Action Items:

Debts can be removed from the action items, charts and graphs by selecting the "Edit" button and unchecking the box next to the debt's name.

Please note that Adjusted rate mortgages, Interest only mortgages, Home equity lines of credit, and Reverse mortgages are not included in the proposed payment strategies due to the complex calculations involved.

When first added, all loans will have a strategy of "Use proposed payment strategy". You can change the strategy in the Action Items.

Choosing an alternative strategy

In addition to "Keep current payment", there are two options to manage the debt payment schedule in Action Items. Select a debt strategy in the drop-down box under Proposed debt strategy:

Selecting a paydown priority:

You can use the "Payment priority" drop-down box to illustrate either a snowball (paying off debts lowest balance to highest balance) or avalanche (paying of debts highest interest rate to lowest interest rate) strategy. If either of these strategies are used, when a debt is paid off, the amount that was going to pay that debt will be reallocated to other debt based on the priority selected.

In addition to reallocating debt payments when debts are paid off according to the priority selected, any difference between the minimum and monthly payment amounts for each debt will be allocated based on the same priority. This will apply to all debts where the debt strategy is set to "Use proposed payment strategy".

Increased monthly payments:

To increase the total amount paid toward the debts, allocate additional dollars to the overall monthly debt payment under the Proposed payment strategy:

The additional amount will be allocated to debts set to "Use proposed payment strategy" based on the Payment priority selected. If "Same priority for all debt" is chosen, the additional amount will be divided proportionally among all the debts that are set to "Use proposed payment strategy".

Refinancing

To illustrate Refinancing of any loan, set the loan's strategy to "Refinance":

This will allow you to enter the Initial Costs, Term and Rate associated with the Refinance. The system will automatically calculate the updated payments based on the information entered, and the results will be reflected in the charts and tables within the Debt module.

Payment sub-tab

The Payment tab shows, based on the changes made on the Strategy tab, the updated payment amount for the next month. This screen also displays an overview of loans, balances, interest rates, etc. Proposed debt payments for next month can be sorted by amount, interest rate, or debt balance by clicking the column header.

The Balance will differ from the current loan/card balance as it reflects the value at the end of the next month.

Details sub-tab

The Details tab displays detailed loan schedules for each loan.

Use the drop-down box to select different loans. Use the radio button to switch between an annual summary and the monthly loan schedule.

How Debt impacts a client's Plan

See how the Debt Strategy impacts the client’s overall plan and cash flows by navigating to Retirement > Analysis and selecting Debt Proposal under the Debt Strategy drop-down in Action Items.

Interaction with Student Loans

Student loans will display on the Debt screen. If the payment plan is Standard in the Loan Card, the loan will fully participate in the Debt tool. However, if they are set up under an income-driven repayment plan (IBR, PAYE, REPAYE), they will not be included in the strategies available under the Debt tool (but will still display on the Debt screen).

In addition, no changes on the Student Loan planning module will impact what is reflected on the Debt screen, or vice versa.

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