RightCapital's dedicated debt management tool allows advisors to easily demonstrate the value of eliminating debt in a financial plan using specific debt reduction strategies. The debt module can be found within the ... More Menu > Debt tab of each client plan:
The Strategy Tab is where you can select a new Payment Priority, as part of the Proposed Payment Strategy for a client's debt. Use the Action Items to dial in your strategy, and see the impact in the chart at the top of the page:
RightCapital allows users to choose from the following strategies in the 'Payment Priority' menu:
- Highest to Lowest Interest Rate: Prioritizing debt payments from the highest to the lowest interest rate is known as the "debt avalanche" strategy. This saves money on interest payments by quickly paying down the principal balance on high-interest debt. This method reduces the interest accruing on debts which can heavily impact total costs.
- Lowest to Highest Balance: Prioritizing debt payments from lowest to highest balance is known as the "debt snowball strategy". This strategy allows clients to gain momentum by paying off multiple debts in a short period of time. Although this strategy saves less on interest when compared to the "debt avalanche" method, it can offer encouragement for clients who are overwhelmed with multiple debt payments.
- Same Priority for All Debt: Debt payments will have the same priority, regardless of interest rate or balance.
Your new Payment Priority can be reflected instantly within any proposed plan in the Retirement > Analysis section, by scrolling down to the Action Items and toggling on the Debt Proposal:
