[The following is a guest article by T. Williams]
A trust deed is advertised as a good way for someone in the UK who is carrying a large amount of unsecured debt that they are unable to fully repay to eliminate that debt for considerably less than they currently owe. A trust deed is a legally binding contract between you and your creditors that allows you to pay a portion of your debt for a specified period of time, typically 48 months, after which the rest of the unpaid debt is discharged.
However, just like any financial product, there are advantages and disadvantages to securing a trust deed to eliminate your debt.
The Advantages
The biggest benefit of securing a trust deed is the ability to satisfy your debt obligations for less than the amount that was originally required. Using a trust deed for debt elimination also makes your debt payments more affordable because you are only paying what you can actually afford to pay while still taking care of your family. When the repayment amount is calculated, your mortgage payments, car payments, and living expenses are taken into consideration. People that secure a trust deed for debt repayment are generally happy to find that interest charges and other fees are frozen once an agreement has been reached with their creditors.
The Disadvantages
When using a trust deed for debt repayment, only unsecured debts can be considered for the repayment plan. Unsecured debts include things like personal loans, credit cards, payday loans, and bank overdrafts. Secured debts, such as mortgage loans and car loans, cannot be included in the Trust Deed’s debts. People are often surprised to find that they must open up their entire financial life to complete strangers in order to take advantage of the provisions of the trust deed. For example, many trust deed Scotland providers have their applicants take a debt test to determine whether they would qualify for a trust deed under the law.
Things To Think About
If the debt test indicates that a trust deed is the best solution for you and your current financial situation, then there are some steps that you must take to ensure that everything stays on track. It is important for you to rework your budget to ensure that you can make all of the payments required for the trust deed so that you do not default and put your assets at risk. A negative mark will be placed on your credit file for accepting the trust deed agreement, remaining for 6 years, and you will not be able to obtain additional credit during the 48-month trust deed period. It is important to carefully consider all of the ramifications of obtaining a trust deed before making your decision to ensure that it is the right decision for you.