What Is a Nuncupative Will?

What Is a Nuncupative Will? – SmartAsset

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Making a last will and testament is an important part of your estate plan and there are different types of wills to choose from. A nuncupative will, meaning a will that’s oral rather than written, may be an option in certain circumstances. While state will laws typically require that a will be written, signed and witnessed to be considered legal, there are scenarios in which an oral will could be upheld as valid. Understanding how a nuncupative will works, as well as the pros and cons, can help with shaping your will-making plans if you have yet to create one.

A financial professional can offer advice on investing, retirement planning, financial planning and various other areas of finance. Find a financial advisor today. 

Nuncupative Will, Defined

A nuncupative will simply means a will that isn’t written. Instead, it’s delivered verbally by the person who intends to make the will.

Nuncupative wills are sometimes called deathbed wills since they’re often created in end-of-life situations where a person is too ill or injured to physically draft a will. The person making the will, known as a testator, expresses wishes about the distribution of property and other assets to witnesses.

How Does an Oral Will Work?

Ordinarily, when creating a will you’d draft a written document identifying yourself as the will maker and spelling out how you want your assets to be distributed after you pass away. You could also use a will to name legal guardians for minor children if necessary and name an executor for your estate.

An oral will sidesteps all that and simply involves the person making the will expressing his or her wishes verbally to witnesses. There would be no written document unless one of the witnesses or someone else who is present chooses to copy down what’s being said. The person making the will would have nothing to sign and neither would the witnesses.

There’s a reason oral wills are no longer used in most states: Without a written document that’s been signed by the person making the will and properly witnessed, it can be very difficult to prove the will maker’s intentions about how assets should be distributed or who should be beneficiaries.

Are Nuncupative Wills Valid?

This type of will is no longer considered valid in most states. Instead, you’ll need to draft a written will that follows your state’s will-making guidelines. For example, most states require that the person making a will be at least 18 and of sound mind. The will also has to be witnessed by the required number of people who don’t have a direct interest in the will’s contents. Depending on where you live, you may or may not need to have your will notarized.

There are a handful of states that still allow oral or verbal wills, however. But they’re only considered valid under certain circumstances.

In North Carolina, for example, oral wills are only recognized if:

  • The person making the will believes death is imminent
  • The witnesses are asked to testify to the will
  • Both witnesses are present with the testator when the will is dictated
  • The testator states that what he or she is saying is intended to be a will
  • An oral statement is made to at least two competent witnesses
  • The testator then passes away

Even if those conditions are met, the heirs to the will would still have to bring a legal action to have it admitted to probate court. The witnesses would have to testify to what was said and even then, North Carolina still doesn’t allow for the transfer of real estate through an oral will.

In New York, the guidelines are even narrower. New York State only allows nuncupative wills to be recognized as legal and valid when made by a member of the armed services during a time of war or armed conflict. The intentions of the person making the will has to be stated in front of two witnesses. State law automatically invalidates them one year after the person leaves military service if they don’t pass away at the time the will was made.

How to Prepare a Will

Having a written will in place can help your loved ones avoid problematic scenarios about how to divide your property after you pass away. If you don’t have a will in place yet, you risk dying intestate. There are a couple of ways you can create one.

The first is using an online will-making software. These programs can guide you through the will-making process and they’re designed to be easy enough for anyone to use, even if you’re not an attorney. If you have a fairly simple estate then using an online will-making software could help you create a will at a reasonable cost.

On the other hand, if you have a more complex estate then you may want to get help with making a will from an estate planning attorney. An attorney can help ensure that your will is valid and that you’re distributing assets the way you want to without running into any legal snags.

Generally, when making a will you should be prepared to:

When making a will, it’s important to remember that some assets can’t be included. For example, if you have any assets that already have a named beneficiary, such as a 401(k), individual retirement account or life insurance policy, those would go to the person you’ve named.

And it’s also important to note that a will is just one part of the estate planning puzzle. If you have a more complex estate then you may also need to consider setting up a living trust. A trust allows you to transfer assets to the control of a trustee, who manages them on behalf of the trust’s beneficiaries. Trusts can be useful for minimizing estate taxes and creating a legacy of giving or wealth if that’s part of your financial plan.

The Bottom Line

Nuncupative wills are rare and while some states do recognize them, they generally aren’t valid in most circumstances. If you don’t have a will in place, then creating one is something you may want to add to your financial to-do list. Even if you don’t have a large estate or you’re unmarried with no children, having a will can still provide some reassurance about what will happen to your assets once you pass away.

Tips for Estate Planning

  • Consider talking to a financial advisor about will making and estate planning. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help. By answering a few brief questions online you can get personalized recommendations for professional advisors in your local area. If you’re ready, get started now.
  • Along with a will and trust, there are other legal documents you might incorporate into your estate plan. An advance healthcare directive, for instance, can be used to spell out your wishes in case you become incapacitated. Power of attorney documents allow you to name someone who can make medical or financial decisions on your behalf when you’re unable to.

Photo credit: ©iStock.com/FatCamera, ©iStock.com/Sean_Warren, ©iStock.com/LPETTET

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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Source: smartasset.com

The Affordable Housing Option That Can Help You Pay Off Debt Faster!

This post may contain affiliate links. Please read my disclosure for more information.

Today I have a guest post from Allea over at AskAllea.com. I was so happy when she reached out to me for a guest post because I love her holistic approach to financial health and her fun writing style. Hope you enjoy!

When you’re trying to pay off debt, you’ll do a lot of things to save money.

You’ve got a small pool of “lifestyle” funds you can have fun with. And with small funds comes big creativity.

I’m all about maximizing the dollars I do have:

  • I plan my meals and cook at home.
  • I rarely buy a drink at restaurants (but I always eat allllll the free chips and salsa they’ll give me — because, of course).
  • I have a free Spotify account and put up with the annoying ads.

These are great ways to squeeze value out of a tight budget, but out of all the ways you can save money, it’s looking at your biggest, fixed expenses where you’ll save the most.

Why Lowering Your Rent Matters

I save with housing.

I’ve kept my housing expenses very low since graduating college. Like, $262.50 in rent low. It’s been key to keeping my fixed expenses manageable and allowing me to put money into savings, pay off debt early and travel.

I’ve been living with two women for the last year, paying supa-cheap rent and drilling through my student loan debt. After starting at $21,000 in student loans five years ago, I’m now down to $6,100. My debt goal is to put $450-550 each month toward my student loans.

In 12 months, they’ll be all gone. Abracadabra — poof!

However, juuuust as I’m on this path to being debt free, things changed.

When Cheap Housing Ain’t Cheap No More

With one roommate moving out to get married and the other hoping to live on her own in the next 6-12 months, I was reminded that affordable housing is a privilege — it’s not always available.

To stay in my current house, for as long as my other roommate will stick around, would cost me almost an additional $300 each month to cover the increase in rent and utilities.

When your sights are set on paying off your debt, $300 is a lot of dough!

Since I’m so close to being debt-free, I’m getting a little desperate. To stay on track, I’m determined to keep my rent low for just one more year.

When your rent is as low as what I’ve been used to, it’s hard to find anything comparable. And when you’d really like to live alone, it’s tempting change your goals to make room for higher rent.

Live Alone or Find a Roommate?

My internal debate between “live alone and push back your debt repayment, ‘cause it’s not a big deal” and “live cheap and take care of your debt like you know you want to” went on for a solid week.

I racked my brain for other places to live. What were my options?

Solo Apartment Life

  • Approximately $700
  • Upside: A place to myself.
  • Downside: Mucho expensive. I don’t own a couch or anything to fill an apartment by myself. It would cost me money to own those things, kind of derailing the whole “paying off debt early” plan I have going on.

One-Roommate Duplex Life

  • Approximately $475
  • Upside: Cheaper than living alone. Only one person to share a shower with.
  • Downside: I’m so over finding a roommate. At 28, I’d rather not have to worry about finding new-roommate harmony.

Multi-Roommate House Life

  • Approximately $350
  • Upside: Cheap.
  • Downside: Sharing a house with three women. Did that for five straight years. I’m totally over it.

Live with Family

  • Approximately no idea what that would cost.
  • Upside: Cheap. No lease.
  • Downside: Is it weird to live with your cousin, his wife and their newborn? Maybe. Felt that was coming a little too close to desperate to be safe.

A Creative Affordable Housing Option

Then, what do you know? One day I was at my friend’s house — she’s in her early 50’s and a widow of just over two years — and she says:

“What am I going to do with this five-bedroom house all by myself?”

Raising my hand slowly, “I’d live with you.”

Aha! The one housing option I didn’t consider before.

Live with a Family That’s Not Yours

  • Upside: Keeping expenses low. Getting to live with my friend, plus she’ll have me around as company in such a big house.
  • Downside: Mmm, any?

We agreed on a flat rate for rent and utilities. I’ll be paying close to what I’m currently spending, so it won’t rock my financial boat at all. Just what I needed!

The goal of paying off my debt as planned is what tipped the scale for me. The money I’ll be saving in rent is better spent on my debt repayment than going to a landlord. It’ll be worth it.

Sure, I can make my lunches at home, but cutting back on my grocery budget isn’t going to save me $300 each month.

Don’t count out the option of living with a family friend, empty nesters from your church or community, or anyone who finds themselves alone for some reason. If you’re lucky enough to find the option you should definitely consider it.

For one more year I may not have the solo-apartment-living life. But in one more year, I will be debt free.

<img data-attachment-id="1169" data-permalink="https://www.modernfrugality.com/affordable-housing-for-millennials/how-to-keep-rent-affordable/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/How-to-Keep-Rent-Affordable-e1497025354280.png?fit=400%2C693&ssl=1" data-orig-size="400,693" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="How to Keep Rent Affordable" data-image-description="

How to Keep Rent Affordable

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<img data-attachment-id="1169" data-permalink="https://www.modernfrugality.com/affordable-housing-for-millennials/how-to-keep-rent-affordable/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/How-to-Keep-Rent-Affordable-e1497025354280.png?fit=400%2C693&ssl=1" data-orig-size="400,693" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="How to Keep Rent Affordable" data-image-description="

How to Keep Rent Affordable

” data-medium-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/How-to-Keep-Rent-Affordable-e1497025354280.png?fit=173%2C300&ssl=1″ data-large-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/How-to-Keep-Rent-Affordable-e1497025354280.png?fit=346%2C600&ssl=1″ loading=”lazy” data-pin-title=”The Affordable Housing Option That Can Help You Pay Off Debt Faster!” class=”aligncenter size-full wp-image-1169″ src=”https://nortonheath.com/wp-content/uploads/2021/01/the-affordable-housing-option-that-can-help-you-pay-off-debt-faster.png” alt=”I never thought of this! What a genius idea!” width=”400″ height=”693″ data-recalc-dims=”1″>

<img data-attachment-id="4844" data-permalink="https://www.modernfrugality.com/affordable-housing-for-millennials/mf-how-to-lower-your-rent-to-pay-off-debt-faster-tips-for-millennials/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?fit=1000%2C1500&ssl=1" data-orig-size="1000,1500" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Save money on rent- tips for millennials" data-image-description="

Housing is the biggest expense. You can lower it to help you payoff debt faster. Read this for tips and tricks to help you lower your rent to save money on housing every single month. #payingoffdebtfast #payingoffdebtquickly #debtpayofftips #savemoneyonhousing #lowerrent #tipstosaveonhousing

” data-medium-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?fit=200%2C300&ssl=1″ data-large-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?fit=400%2C600&ssl=1″ loading=”lazy” width=”400″ height=”600″ data-pin-title=”Save money on rent- tips for millennials ” data-pin-description=”Housing is the biggest expense. You can lower it to help you payoff debt faster. Read this for tips and tricks to help you lower your rent to save money on housing every single month. #payingoffdebtfast #payingoffdebtquickly #debtpayofftips #savemoneyonhousing #lowerrent #tipstosaveonhousing ” src=”https://nortonheath.com/wp-content/uploads/2021/01/the-affordable-housing-option-that-can-help-you-pay-off-debt-faster.jpg” alt class=”wp-image-4844″ srcset=”https://nortonheath.com/wp-content/uploads/2021/01/the-affordable-housing-option-that-can-help-you-pay-off-debt-faster.jpg 400w, https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?resize=200%2C300&ssl=1 200w, https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?resize=768%2C1152&ssl=1 768w, https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/06/MF-How-to-Lower-Your-Rent-to-Pay-Off-Debt-Faster-Tips-for-Millennials.jpg?w=1000&ssl=1 1000w” sizes=”(max-width: 400px) 100vw, 400px” data-recalc-dims=”1″>

Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.

Source: modernfrugality.com

How the Debt Snowball Works

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You may have heard of Dave Ramsey’s debt snowball as a popular method for getting out of debt. We’re going to share how the debt snowball works so you can decide whether it’s a smart way for you to get your debt paid off.

The debt snowball method has a lot of great reasons for being one of the most popular methods of paying off debt quickly. But is it right for you?

Let’s find out.

In This Article

What is the Debt Snowball?

The debt snowball is debt payoff method where you list your debts from the smallest debt to the largest debt. Don’t worry about the interest rates you’re paying; just list the debts in order from smallest to largest.

Once you pay off one debt then you roll the money you were paying on that debt into the next smallest debt. Think of the proverbial snowball rolling down the hill.

This method is designed to help you pay off your debt as quickly as possible.

Your goal will be to “snowball” your payments, adding more money to each one as you tackle the debts one by one, paying off the debts and creating your debt snowball.

As your proverbial snowball rolls down the hill, the snowball gets bigger and bigger. In the same way, the debt snowball method of paying off debt calls for you to snowball your debt payments into bigger payments as you tackle each debt.

As you continue to put additional monies onto each minimum debt payment, the debts get paid off faster and faster. And you pay more extra money onto each debt as the debts get paid in full in order from smallest to largest.

The reason you pay the debts in order from smallest to largest is because it allows for some fast success in eliminating debts from your line item chart. And that will give you emotional momentum and encouragement as you see your debts disappearing.

Here’s a detailed breakdown of how the debt snowball works.

Start With Your Budget

When you make your monthly budget each month, you’ll have a list of each of your debts along with the minimum monthly payment included in that budget. Let’s use this example:

Debt Minimum                               Payment                                   Total Balance

First credit card                                      $25.00                                            $225.00
Second credit card                                 $50.00                                            $450.00
Third credit card                                   $150.00                                          $5,000.00
Car loan                                                  $450.00                                       $15,000.00
Mortgage                                              $1500.00                                      $250,000.00

So you’ve got all of these debts and payments. And you’ve got your other living expenses. Using a budget–and sticking to that budget–is a key factor in the success of the debt snowball.

We recommend using a zero-sum budget. A zero-sum budget is a budget that assigns every dollar of income you earn a designated job. In other words, there is no “extra” income left over at the end of the month.

You budget in dollar amounts for everything from monthly bills to entertainment spending, giving each category specified dollar amounts. For example, you’ll include money for hitting the clubs with friends and a designated amount of money each month that you can spend on whatever you wish.

You Have to Stick to Your Budget

The important part of success in the zero-sum budget is that you stick to the budget amounts you’ve allotted in each area. For instance, let’s say your extra spending money budget line gives you $200 a month to spend on whatever you want.

If you spend that entire $200 on a weekend shopping spree at the beginning of the month, you’ve got to refrain from spending any more extra spending during the month. Or you’ve got to find another category of spending that you can take from–groceries for instance.

But do your best to stick to the allotted amounts in your budget. Sticking to your budget is key to making the debt snowball work for you. Here’s why.

Making Your Debt Payments

Sticking to your budget is how the debt snowball works to help you pay your debts off faster. Using the budget we created above, you’ll see that you should pay off credit card #1 in roughly ten months if you’re making minimum payments only.

Once that credit card is paid off, you’ll take that $25 you were paying on that card each month and add it into your payment for credit card number two. In other words, that payment will now be $75 per month instead of $50 per month.

And after that credit card is paid off, the extra $75 from that card will go toward credit card #3 each month, making that payment $225 per month.

This “snowballing” of the payments will allow for a lot of extra money to be added toward your debt payments each and every month. After the credit cards and loan are paid off, the money that was being used for those payments will go toward the mortgage balance.

Think about it: By the time this fictitious budgeter gets their cards and car payment paid off, they’ll have an extra $675 every month to pay as an additional principal payment on their mortgage.

That equates to an extra $8,100 in payments each year. In the case of our $250,000 mortgage holder, that can cut as much as 15 years off of their mortgage payments.

Finding Extra Income for Your Debt Snowball

And here’s where the debt snowball method really gets good.

As you design your budget, you may be able to find even more income each month that you can add on to the smallest debt payment you have.

Using the extra income you have in your budget to help grow that debt snowball is what’s going to help you get out of debt even faster. Let’s say that after you add up all expenses and compare them with your income, you find you’ve got an extra $100 per month with nowhere to go.

Put that $100 as an additional payment onto your smallest debt. After that’s paid off, you’ll roll it into the next debt payment just like you do with the minimum payment for the smallest debt.

Another additional $100 on your debts will really fast track debt payoff.

Here are some ways you may be able to find some extra income each month to make your debt snowball get bigger as you pay off your debts.

Cutting Expenses

One way to find extra income for your debt snowball is to cut your expenses. Maybe you spend less money on going out each month. Or you ditch going out to eat and eat all your meals at home.

You could cut your grocery spending or drop expenses you don’t need, such as cable TV subscriptions or expensive salon trips. You could shop around for car insurance and find cheaper rates.

Or you could sell your car and buy a cheaper one you can pay for with cash. Go through each line item in your budget and see if there’s a way you could reduce it or eliminate that line item.

Then take all of the money you save each month by doing that and put it onto your debt snowball. That will make your debt snowball even bigger and help you pay your debt off even faster.

Increasing Your Income

Another way to make your debt snowball get bigger is to find ways to increase your income. You can do that in a number of ways. Here are some ideas.

Increase Your Income at Your Main Job

Can you find ways to increase your income at your main job? Can you pick up some overtime hours? Or, can you ask for a raise?

Another idea might be to go for a promotion. Is there a job opening at work that will allow for a larger salary? Check with your boss and ask if there is any way you can earn more money at work.

Get a Second Job

Getting a second job might be a good option for you to increase your income. Can you deliver pizzas? Work retail during the holidays? Clean offices at night?

Scour your local want ads or Craigslist site to see who’s hiring for a second job. This can be a permanent job or a temporary job–you decide. Just be sure you put all of the net earnings toward paying off your debt using the debt snowball.

Start a Side Hustle

A third option for increasing your income is to start a side hustle. What skills do you have that you can turn into extra cash? Can you work as a handyman? What about babysitting kids? Or caring for or walking dogs?

Maybe you can tutor kids online. Or sell your t-shirt designs on a site like Redbubble. Another idea is to work online as a virtual assistant or social media manager. You could drive for Lyft or deliver groceries for Instacart.

There are dozens of ways you can earn thousands of dollars really quickly. You just have to figure out which of your skills are best put to use given the area you live in and your available time.

Sell Your Stuff

Another way you could find extra money to put toward your debt snowball is to sell your stuff. Do you have stuff lying around in your closets and storage area that you no longer use? Consider selling it on Craigslist or a similar site and getting extra cash you can use to pay off debt.

A good rule of thumb when deciding what to sell is to ask yourself one question: Have I used this item in the past year?

If you haven’t, consider selling it (heirloom and other emotionally impactful items excluded).

Whether it’s a part-time job, your own personal side hustle business, or getting a promotion at work, any extra income you gain will allow you to speed up the debt snowball process.

How the Debt Snowball Works Better Than the Debt Avalanche

Some people recommend paying off the debts that are charging you the highest interest rate first. This method of debt payoff is sometimes called the Debt Avalanche. You may be wondering why we’re not recommending paying off the high interest debts first. After all, won’t paying off the high interest debts first save you more money in the long run?

Yes, it probably will. However, debt is a huge psychological burden for many people. Imagine you’ve got eight or nine or ten debts staring you in the face. It might feel a lot like you’re being ganged up on by neighborhood bullies.

The faster you can knock those debts out, one-by-one, the less “bullies” you’ll have pushing you around. Kicking those “bullies” to the curb will give you the confidence and strength you need to keep pushing that debt snowball forward. In other words, it will give you more momentum.

Conversely, if you tackle the highest interest debts first you may not see a debt totally paid off for many months. This can be wearying from a psychological standpoint and cause you to give up on your debt payoff goals.

Some people aren’t phased by the long list of debts in front of them. They do well with paying off the highest interest debts first. However, most prefer the psychological momentum they gain by knocking out the smaller debts super fast. Even if it does cost them a bit more money in the long run.

Only you can decide if you should choose to pay off the higher interest debts first instead of working the debt snowball method.

Should I Consolidate My Debt?

You can also make a case for consolidating your debt into one large balance and one payment. However, that method can also be wearying. This is because it will likely be quite time before that large loan is paid off. This is especially true if you’ve got a lot of debt. And if you haven’t changed your money habits, a debt consolidation loan can lead to even more debt.

But again, the choice is yours. You know yourself better than anyone, and you know how to best motivate yourself to reach lofty goals.


The debt snowball is a tried and proven method millions of people have used to get out of debt. It’s simple to use and allows for fast wins as you knock your debts out from smallest balance to largest balance.

And adding extra money to your snowball by decreasing your expenses or increasing your income will help your debt snowball get even bigger. And that means you’ll get your debt paid off even faster.

Now that you know how the debt snowball works, will you use it to pay off your debt? Or, have you used the debt snowball in the past? If so, did it work for you? What did you like about it?

What did you not like about it? Feel free to share your thoughts in the comments section.

Laurie is personal finance writer and a licensed Realtor. Her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.

Source: debtdiscipline.com

Should I Pay the Debt Collector or Original Creditor?

When a debt exists there are two parties involved – the creditor, who is the source of the loan, and the debtor, who is the receiver of the loan. If you are a debtor whose loan or credit card account goes into default, be prepared to face serious repercussions.

negotiate debt

However, it’s never too late to get your payments back on track, and it’s much easier to accomplish when you’re dealing with the original creditor. In fact, you should try to avoid having your debts sold to a collection agency at all costs.

Dealing with a collection agency can cause a ripple effect in many areas of your life, both financially and personally. Find out why it’s better to settle your debt before it’s sent to a debt collector and how to negotiate with the original creditor instead.

Why should you avoid having your debt go to collections?

It’s better to deal directly with the original creditor than to have your debt sold to a collection agency. Collection agencies are often more aggressive in their collection attempts and may take extreme measures.

The “original creditor” is the first source of the money loaned. If they can’t get you, as the debtor, to pay your debt, they often turn the effort over to a debt collection agency.

Debt Collectors

In some cases, they sell the debt to a third party – a “debt buyer.” A debt buyer is a type of debt collector who pays them a percentage of the total debt to be collected. In most cases, debt buyers pay pennies on the dollar for the debt.

At that point, the debt collector owns the debt and can then proceed to collect the full amount, plus fees, court costs, and interest. Typically, the debt collector can go to court with a lawsuit against you.

If you lose the case, you’ll receive a judgment, oftentimes for the highest amount possible. If you don’t pay the judgment right away, it could continue to accrue interest.

Eventually, you could also be subject to wage garnishment to have the judgment repaid. Plus, having either a collection or judgment (or worse, both) listed on your credit part can do lasting damage to your credit score.

Your best bet is to deal directly with the original creditor and avoid dealing with a debt collection agency altogether.

How do you know if your debt has been sent to collections?

The original creditor handles most debts until they hit about 150 days of delinquency. If you’re only two or three months behind on your payments, chances are, the creditor still holds your debt.

You should receive a letter in the mail warning you that your account is about to go into collections, so keep an eye out for any correspondence from your creditor.

Never throw any paperwork away, even if you’re dreading what may be inside. If you’re not sure if you’ve received a letter or not, call the creditor. Even if you’re at odds with them, they should be a trustworthy source of information regarding your account’s status.

Is it better to pay the debt collector or original creditor?

If the creditor indicates that your account has already been sold to a debt collector, first see if you can ask to have it pulled back from collections. If they won’t do that, it’s important to contact the debt collector and validate the debt. This ensures that they haven’t resold your account elsewhere and that you’re negotiating with the right party.

Hopefully, though, your debt still resides with the original creditor, and you can move forward with them in the settlement process. This is also why it’s important to stay on top of correspondence and not put off dealing with defaulted loans any longer than necessary.

Dealing with a Debt Collector

If you must deal with a debt collector, you should first be aware of your rights under the Fair Debt Collection Practices Act (FDCPA). Should you have any complaints about how they are handling the debt, you can contact the Consumer Financial Protection Bureau.

Also, check out our in-depth article on how to settle your debts with a debt collector.

How to Settle Your Debt with the Original Creditor

Before picking up the phone and asking to pay off your debt with a lesser amount out of good faith, have a strategic plan in place. Don’t be afraid to jot down some notes or talking points to have on hand. Ready for a strong negotiation plan? Let’s get started.

Know Your Financial Ability

If you’ve defaulted on your debt payments, chances are you’re having trouble with money. When negotiating with an original creditor, it’s important to know exactly what you can offer in advance.

For example, if the debt amount is $1,000 and you have $500 in hand with which to pay it, then it makes sense for you to make contact with that goal in mind.

It’s not a good idea to make any promises you know you can’t keep. Plus, a creditor is more likely to accept a lump sum payment over installments because it’s guaranteed cash for them. So it’s important to go into negotiations with your final number in mind and make sure it’s one you can actually hand over.

Exactly what percentage of your debt is a creditor willing to settle for? The answer really depends on each individual creditor. But one factor that is a major influencer is time. If a debt is newer, say 120 days old, the creditor will most likely want closer to the amount owed.

If a debt is older, such as 9 months old, the creditor will most likely accept a lower amount to settle the matter and get it off their books. Because of this fact, it’s helpful to do a little homework to determine what the creditor’s situation may be before attempting to settle the debt.

Handling Negotiations

Everyone knows it is best not to offer all you have to the creditor at the outset of negotiations because whatever amount is offered, there will no doubt be a counter-offer. This begins the process of negotiation. The process ends when an agreed-to amount is set.

While most creditors want a lump-sum payment over installments it is possible in some cases to establish an installment agreement. This is helpful in stopping the collection calls and keeps the creditor from initiating court action.

However, it’s also important to only agree to a payment plan that you can afford. Usually, if an installment agreement is established and you miss a payment, the full amount of the original debt (less any payments) will again become due. Remember, the creditor already has the experience of your failure to pay, and now they want to see success.

Still, it’s important to protect yourself. If the original debt was agreed to be settled for a lesser amount, be sure to get an agreement in writing from the creditor. This is usually done prior to the exchange when you actually pay the debt.

See also: The 623 Dispute Method – Disputing with the Original Creditor


To recap, the main action items for debtors who wish to settle their debt with the original creditor are:

  • Know your scope of your financial ability to repay
  • Make contact with the original creditor
  • Have money ready to make a lump sum payment
  • Negotiate with clarity
  • Fulfill all promises to the creditor
  • Get everything in writing BEFORE sending money

How does settled debt affect your credit?

Once you’ve settled your debt with the original creditor, your credit score will likely take a hit because the debt will be listed as “settled.” It’s still better than being defaulted or charged-off, but it’s something that future lenders can see. And it could raise a red flag when considering your application for credit.

To avoid this scenario, use your credit report listing as part of the negotiation process, especially if you’re offering a large one-time payment.

As part of your agreement to pay, you can request the creditor to report the debt as “Paid As Agreed.” Even if you don’t end up successfully getting that listing, it’s worth a shot, and could even be used as further leverage during the negotiation process.

How else can you get help settling your debt?

If you’re not confident in your ability to handle the process and negotiate the debt settlement successfully on your own, you can hire an outside firm to do it for you. In general, it is best to utilize a debt settlement service with extensive experience in negotiations.

Check Out Our Top Picks:

Best Debt Settlement Companies of 2021

Credit counselors can help, as can professional settlement companies or even lawyers. The idea is to settle the debt for as little as possible so as to avoid court action and the negative effects the information will have on your credit report and credit score.

Source: crediful.com

What You Should Know About the Right of Redemption

  • Get Out of Debt

If you are a homeowner with a mortgage, you might have heard about your right to redemption. For those who have been struggling to make their house payments, this is one route that can be taken to avoid foreclosure.  

What is the Right of Redemption?

If you own real estate, making mortgage payments can be hard, but foreclosure is something that most people want to avoid. The right of redemption is basically a last chance to reclaim your property in order to prevent a foreclosure from happening. If mortgagors can manage to pay off their back taxes or any liens on their property, they can save their property. Usually, real estate owners will have to pay the total amount that they owe plus any additional costs that may have accrued during the foreclosure process. 

In some states, you can exercise your right to redemption after a foreclosure sale or auction on the property has already taken place, but it can end up being more expensive. If you wait until after the foreclosure sale, you will need to come up with the full amount that you already owe as well as the purchase price.  

How the right of redemption works

In contrast to the right of redemption, exists the right of foreclosure, which is a lender’s ability to legally possess a property when a mortgager defaults on their payments. Generally, when you are in the process of purchasing a home, the terms of agreement will discuss the circumstances in which a foreclosure may take place. The foreclosure process can mean something different depending on what state you are in, as state laws do regulate the right of foreclosure. Before taking ownership of the property through this process, lenders must notify real estate owner and go through a specific process. 

Typically, they have to provide the homeowner with a default notice, letting them know that their mortgage loan is in default due to a lack of payments. At this point, the homeowner then has an amount of time, known as a redemption period, to try to get their home back. The homeowner may have reason to believe that the lender does not have the right to a foreclosure process, in which case they have a right to fight it. 

The right of redemption can be carried out in two different ways:

  • You can redeem your home by paying off the full amount of the debt along with interest rates and costs related to the foreclosure before the foreclosure sale OR
  • You can reimburse the new owner of the property in the full amount of the purchase price if you are redeeming after the sale date. 

No matter what state you live in, you always have the right to redemption before a foreclosure sale, however there are only certain states that allow a redemption period after a foreclosure sale has already taken place. 

Redemption before the foreclosure sale 

It’s easy to get behind on mortgage payments, so it’s a good thing that our government believes in second chances. All homeowners have redemption rights precluding a foreclosure sale. When you exercise your right of redemption before a foreclosure sale, you will have to come up with enough money to pay off the mortgage debt. It’s important that you ask for a payoff statement from your loan servicer that will inform you of the exact amount you will need to pay in order save your property. 

Redemption laws allow the debtor to redeem their property within the timeframe where the notice begins and the foreclosure sale ends. Redemption occurring before a foreclosure sale is rare, since it’s usually difficult for people to come up with such a large amount of money in such a short period of time. 

The Statutory Right of Redemption after a foreclosure sale 

While all states have redemption rights that allow homeowners to buy back their home before a foreclosure sale, only some states allow you to get your home back following a foreclosure sale. Known as a “statutory” right of redemption, this right as well as the amount of time given to exercise it, has come directly from statutes of individual states. 

In the case of a statutory right of redemption, real estate owners have a certain amount of time following a foreclosure in which they are able to redeem their property. In order to do this, the former owner must pay the full amount of the foreclosure sale price or the full amount that is owed to the bank on top of additional charges. Statutory redemption laws allow for the homeowners to have more time to get their homes back. 

Depending on what state you live in, the fees and costs of what it takes to exercise redemption may vary. In many cases during a foreclosure sale, real estate will actually sell for a price lower than the fair market value. When this happens, the former owner has a slightly higher chance of being able to redeem the home. 

Source: pocketyourdollars.com

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