Ask anyone you know if they have heard of a Scottish Trust Deed and I guarantee you most of they haven’t. Most people think Trust Deeds or a ‘Deed of Trust’ is to do with the property market, which it is to some degree, but the definition of a Scottish Trust Deed is actually a form of debt help for Scottish residents. Debt has become an increasing problem not only in Scotland, but in the rest of the United Kingdom and in fact the rest of the world. Thanks to the banks, the world economy is in a global meltdown. Whilst the greedy high flyers at the top are sitting back and laughing while the government pumps more money into yet another bailout, people are losing their homes and it’s inevitably the taxpayer who picks up the bill. Yes, debt is here to stay, at least for the next couple of decades I imagine and I’m sure our grand children will have to take some of the burden. Anyway, back to the topic…
So, what exactly is a Scottish Trust Deed? To summarise, it is an agreement between your creditors and yourself to repay a lower, set amount each month towards your debts for a 36 month period. Any remaining debt is then written off after the period has elapsed. It is very similar to an English Individual Voluntary Arrangement but with a more favourable criteria.
200 per month is not the set amount for an IVA There is a lot of misleading information in circulation regarding IVAs. Most people assume you pay 200 per month and then in 60 months you are debt free, but to be honest it all depends on your circumstances. The main factor is that you must be able to repay at least 25% of the total debt over the 60 month period, so if this works out at 200 for you, great! But it doesn’t for everyone.
There is a set period for a Trust Deed which is 36 months, whereas an IVA is 60 months, 2 years in comparison and the minimum debt level is 10,000 as apposed to 15,000 (5,000 difference). The minimum percentage that must be repaid is only 10% as apposed to 25% with an IVA and the minimum repayment level is 150 per month, 50 less than an IVA. So if you are resident in Scotland, can afford at least 150 per month and owe over 10,000 in unsecured debt your luck is in!
No everyone is suited to a Trust Deed… So if you have been sold on the benefits of a Trust Deed, remember they are not for everyone. They are only meant for people who cannot find a suitable solution to their debt problems and who are genuinely struggling to keep up their repayments on their debts. Viable reasons to take out this Scottish debt solution would be if you lost your job, had a reduction in salary or you took out too much debt. Trust Deeds are exceptionally good if you are a homeowner who is facing financial difficulty as it can prevent repossession.
Another important bonus of a Trust Deed is the interest and charges are frozen, meaning the debt will not accumulate like it probably is now where the majority of your monthly repayment is going in the banks pocket and only a small percentage of your debts are actually being paid off each month.
There are downsides to the Trust Deed debt solution. Your credit rating will take a hit for the 36 month period you are on the programme and it will probably take some time to recover, but if you have been struggling with your debt for years then it is most probable that you will not want any more credit cards and loans and steering clear of debt will be your number 1 priority! So it is highly likely that you will not require your credit rating in this sense. The other downside would be your reputation. Some people may feel embarrassed or self conscious of the fact they are in the Trust Deed programme and will be worried what people think of them if they find out. But I think for the majority of us, being completely debt free for good would definitely override any insecurity!
For more benefits on Protected Trust Deeds and how it can help you get on the road to financial freedom. For more advice on Trust Deeds visit our website
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