Can a personal loan be included in a Protected Trust Deed?
A Protected Trust Deed could help you deal with your unsecured debts - so a personal loan can be included. Other unsecured debts can be included too, like credit cards, overdrafts and store cards.
Unsecured debts are different to secured debts because they aren't secured against an asset - for example, your mortgage is secured against your house.
What are the other requirements for a Protected Trust Deed?
Though personal loans (and other unsecured debts) can be included in a Trust Deed, it depends on whether you're eligible.
Firstly, you must be a resident of Scotland. You must also be unable to afford your unsecured debts, to the point where you doubt you'll be able to repay them in full in any kind of realistic timeframe. You should, however, be able to make a reasonable monthly contribution towards them for a four-year period.
If you're struggling with your monthly unsecured debt repayments at the moment, but you can see yourself being able to clear your debts in a realistic amount of time, the Debt Arrangement Scheme (DAS) might be more suitable for you.
What are the advantages of a Protected Trust Deed?
If enough of your lenders agree to the proposed terms, your Trust Deed will become protected - which means that your unsecured lenders won't be able to take you to court, ask for higher payments, or try to make you bankrupt. For this to happen you need to get the agreement of at least 50% of your secured debt and who own at least 33% of your debt between them.
A Trust Deed could benefit you by allowing you to make manageable payments each month. A professional Insolvency Practitioner will help you work out how much you have to put towards your unsecured debts every month - after your essential costs have been taken care of.
You'll make these manageable payments until your Trust Deed is complete - usually after four years, if you've stuck to your payments as agreed. After this, any remaining unsecured debt included in your Trust Deed will be written off.
During your Trust Deed, all interest and charges on your unsecured debts will be frozen. Your qualified Insolvency Practitioner will also offer help and guidance throughout the process - and negotiate with your lenders for you.
Unlike bankruptcy, you won't be asked to sell your home during a Trust Deed. This can be a real relief to homeowners - but bear in mind that you might be asked to release equity in your home if you enter a Trust Deed and, if this, is impossible, the Deed could be extended by 12 months. .
And despite its advantages, a Trust Deed will damage your credit rating for six years. During this time you'll probably find it harder and/or more expensive to obtain further credit. Having said that, if you had carried on failing to meet your unsecured payments every month, this would have also damaged your credit rating.
If you'd like professional advice about whether a Trust Deed is right for you, fill out our debt solution finder.
Article Updated 12/12/2013