Posted in: Tips

How a Trust Deed works

Makes your debt repayments affordable again

During a Trust Deed, your unsecured debt repayments will be rolled into a single affordable monthly payment. You’ll only pay as much as you can afford after you’ve covered your bills and other living costs.

Writes off the unsecured debt you can’t afford

On successful completion of your Trust Deed, any unsecured debt you haven’t been able to repay is written off for good, as long as it was included in your Trust Deed – Note you may have to repay any debt not included in your Trust Deed.

Clears unsecured debts in three years

In most cases, a Trust Deed lasts three years – so you’ll have a clear date for becoming free of the debts included in the arrangement. You’ll be expected to make a payment every month during this time.

Apply for a Trust Deed

Keep in mind that you’ll only be eligible for a Trust Deed if you really need it. Your lenders are only likely to accept a Trust Deed if they can see you won’t be able to repay your unsecured debts in full within a reasonable period of time under your alternative repayment arrangements. At the same time, you must be able to commit to regular monthly payments.

Disadvantages of a Trust Deed

There are a few disadvantages to consider before you go ahead and apply for a Trust Deed.

Firstly, it will have a significant impact on your credit rating. This could make obtaining further credit more difficult for six years and if your Trust Deed fails, you could be made bankrupt.

Also remember that because you’ll be expected to pay as much as you can throughout your Trust Deed, you’ll be left with very little money for anything except your essential living costs.

And although you’ll be able to stay in your home, homeowners who enter a Trust Deed may be required to release equity from their home as part of the arrangement. Note that you may find it harder to obtain a remortgage and you may pay a higher rate of interest if you are successful.

But keep in mind that the consequences of not getting the help you need could be even more serious.