Trust Deed Pros And Cons

Trust Deed Pros And Cons

The Scottish government has offered multiple debt solutions to her residents to alleviate the sufferings from mounting unsecured debts. The cascading effect of penal interest rates and other charges only tend to make things further worse for the debtors. The Scottish Trust deed is among the debt solutions offered by the government to enable Scottish debtors pay off all their unsecured debts and start all over again building their financial history.  However, when you are considering this debt solution, it is important that you understand the pros and cons of entering into a Trust Deed/Protected Trust Deed. Once you have set up a trust deed, it is critical that you stick to your monthly payments into the trust with great regularity. Without this, the trust deed can potentially fail and you may be denied a fresh opportunity to pay off your debts and claw back into the main stream of the society. Understanding the pros and cons of the trust deed will help you determine whether this solution suits you best.

The Pros of Trust Deed

A trust deed helps you consolidate all your unsecured debts into a single debt and make one monthly payment to the trustee. This monthly payment itself is arrived at after taking into account your disposable income and other freehold assets. Through this process, your creditors may receive only less money than they are actually due. However, a legally binding agreement will prevent them from taking any recovery action against you. A Trust Deed runs for 48 months and at the end of the period, if any debt remains unpaid that is written off. You are required to make monthly payments as agreed throughout the 48 months and even make additional contributions if you receive more income through other sources. Upon completion of the trust deed, you have the opportunity to rebuild your financial history.

The Cons of a Trust Deed

The fact of the trust deed will be reflected in public records and your credit score will suffer. Getting fresh credit will be expensive and may be difficult to come by. During the currency of the trust deed all your credit cards/store cards will remain suspended and defaults against the trust deed will attract severe penalties. Upon completion of the trust deed, you will be classified as a high risk borrower and lenders may not approve you for fresh loans. Even when you manage to obtain a new loan, the cost can potentially be prohibitive. Your spending habits will undergo major changes and you may be compelled to take a cautious stand on utilizing credit that you cannot afford to pay back.

The social embarrassment is another factor you may need to contend with. Some employers may also seek separation from employment on the grounds of inappropriate behaviour as they may view the trust deed as a precursor to bankruptcy. While the trust deed brings along the advantage of paying way below what your creditors are legitimately due, the price that you pay for this advantage can be overwhelming.