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Soutermon
Just Joined

1 Posts

Posted - 11 March 2019 :  14:34:51  Show Profile  Reply with Quote
Hi,

I am currently going through the application process for a Protected Trust Deed. AS it stands, I am weighing up my options between this and a second charge mortgage. I see the pros and cons for both options, but the thing that worries me about the Trust Deed is the 4-5 years of poor/no credit rating. I am self employed, so there is a scenario where I may have more surplus cash at times, so can I use this to pay off the Trust Deed and be released earlier?

Cheers

Swandog
Advanced Contributor

200 Posts

Posted - 11 March 2019 :  14:59:01  Show Profile  Reply with Quote
Hi Soutermon and welcome the forum.

How much debt do you have at the moment and how much equity do you think there is in your property?

In a Trust Deed the only way in which you can shorten the timescale form the standard 4 years is for the full repayment of your debts plus interest and costs of the Trustee. This will be more than the original debt that you went into the Trust Deed with.

You also need to think carefully about a second charge against your house. You would be effectively taking unsecured debt that has nothing really to do with your house and putting this against it. If you could repay the loan it could have an impact on the house.

You also need to weight up how much interest you will pay back for the loan secured against your house. Your debt could be 20,000 but you repay back 30,000 or 40,000 over the term.

An alternative option to the Trust Deed could be a Debt Arrangement Scheme. This would have any impact on your house and if you were able to pay more money to the debt it would reduce the term and timescale.

The only way to safeguard your credit rating is to make sure you make all the agreed payments per month on time or pay the debt off in full.

Have you spoken to a qualified debt advisor about all of your options and not just a Trust Deed or a secured loan? A good advisor can discuss all the options, understand your business a bit better and then you can think more thoroughly about things.
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Kevin Mapstone
Trust Deed Expert



3715 Posts

Posted - 11 March 2019 :  17:53:58  Show Profile  Reply with Quote
Hi Souterman

If you have sufficient equity in your property to mean that you can consolidate and pay off your unsecured debts in full then it is likely that a Protected Trust Deed would not be a viable route for you anyway.

Do you think you will need to be able to access further credit during the next 4/5 years? If so, then the secured loan/remortgage route may be your only route forward that doesn't impact on your ability to get this credit. However affordability is key and the last thing you want to do is consolidate everything onto a secured loan which you are going to struggle to pay. You are then just putting your house at risk unnecessarily. Instead, as Swandog suggests, it may be worth getting advice about a Debt Arrangement Scheme plan instead. Interest would be frozen and you would pay the debts off at a rate you can afford.


Recommended Partner & Trust Deed Expert - Ask me for help setting up a Scottish Trust Deed    
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Sharon Toal
Trust Deed Expert



351 Posts

Posted - 12 March 2019 :  08:35:28  Show Profile  Reply with Quote
Souteman

I agree, there are pros and cons of obtaining secured borrowing over the property but please bear in mind, by consolidating to a secured loan, you may pay back more in interest that you would normally pay and there is also a risk to your property should you be unable to maintain payments.

A Debt Arrangement Scheme may be a more suitable options and can be set up fee of charge through the Citizens Advice or local authority money advice service.

Sharon is no longer posting in the forum.
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