Car Finance with a Scottish Trust Deed
If you've applied for a Scottish trust deed and you're not sure what the implications are for your future car finance, you're in the right place. Trust deeds can make it harder to get finance, but they don’t necessarily have to be a barrier to driving your dream car.
At Car Finance 247, we're experts in the world of vehicle finance, aiming to educate British drivers as much as possible about their finance options. Finding yourself in debt is understandably troubling, but we hope that this guide will help to put your mind at rest.
If you'd like more information, please get in touch here. Otherwise, you can see what your finance deal could look like by getting a quote on our homepage.
What is a Scottish trust deed?
A Scottish trust deed is a debt solution only available to residents of Scotland, so it's not an option for people from other areas of the UK. However, if you reside in England, Wales or Northern Ireland, there are several other debt solutions you can apply for if you are unable to pay back your creditors.
A trust deed is a voluntary arrangement between yourself and your creditors, in which you agree to pay a regular amount of money towards your debts (usually via monthly payments). At the end of the contract term, any remaining debt will be written off.
With a trust deed, your assets and money are passed to a trustee to look after during the contract, who aims to pay back as much money to your creditors as possible. You can have either a protected or unprotected trust deed:
A trust deed is classed as protected if the majority of your creditors agree to the deed. With a protected trust deed, the contract is binding to all your creditors and they cannot take further steps to recover money from you.
A trust deed is unprotected when the majority of your creditors have not agreed to the deed. This means that the arrangement is not legally binding and your creditors can still take steps to recover the debt.
As you can see, it's preferable to try and ensure your trust deed is protected, as this will prevent your creditors from contacting you further.
How much does a deed of trust cost?
To set up a Scottish trust deed, your trustee will charge a fee for setting up and administering your deed. The exact fee will depend on your own personal circumstances, but you can usually expect to pay at least £4,000.
However, the good news is that you don’t need to pay anything before your deed is set up. Instead, your fees will be incorporated into the monthly instalments you pay to clear your debt.
Can you get car finance on a trust deed?
If you rely on a car for everyday use, it’s normal to feel concerned about how a trust deed will affect your future finance. Trust deeds normally last for around four years, so there's a good chance you may need to take out a new finance deal during that time.
Whilst trust deeds can make it harder to find car finance (particularly if you have a low credit score), you may still be able to source a suitable finance deal by shopping around. You're also more likely to be able to get a Hire Purchase (HP) finance deal than a Personal Contract Purchase (PCP) deal, so this is something else to consider.
Trust deeds are the most common debt solutions in Scotland, so it's likely that many lenders will have experience with this form of debt solution. However, in most cases, you will need to prove that you need a car (e.g. for work or commuting).
At Car Finance 247, we have a broad panel of lenders, some of whom can offer loans to people with poor credit ratings or people with a protected trust deed. To find out more, please head to our dedicated bad credit car finance page.
Will I lose my car if I enter a trust deed?
If you already have a finance loan, your deal will usually not be included within a protected trust deed. If you are unable to pay for your car, you would usually have to hand the car back, instead of including the cost within your monthly repayments. In some cases, car finance can be classed as an essential expenditure, which would allow you to keep your vehicle - so long as you are able to make your monthly repayments.
However, if you've got debt from a previous car finance deal and you no longer have the car, you may be able to include this debt within your protected trust deed.
Can I put my car in a trust?
In most cases, your car will not be classed as an asset within a trust deed, unless it's currently worth more than £3000 and you are unable to keep up with your payments.
If your car is worth more than £3000, it can be classed as an asset within your trust deed. This means that you’ll have extra liability, so you'll need to work with your trustee to decide how to deal with this.
Some of your liability options include:
Taking a payment from a third party (for example, a family member)
Downgrading your vehicle to a cheaper car when the trust deed starts
Making extra contributions when the trust deed ends
If in doubt, you're best speaking to a specialised debt advisor to find out the best option for your financial circumstances.
Can you pay off a trust deed early?
The simple answer to this question is yes, you can pay off a trust deed early. A typical trust deed lasts for four years, but it can be extended or shortened in certain circumstances.
It could be that you've had a sudden windfall (either from selling your home or from inheriting some money). If this is the case, then you may want to pay off your trust deed early. However, even if you do this, it's important to note that your trust deed will still remain on your credit history for six years.
If you'd like to pay off your trust deed early, you should contact your trustee and make them aware of your circumstances.
Can I get a car finance loan while in a trust deed?
It will be harder to get a car finance loan whilst in a trust deed, but it's not completely out of the question.
However, you will need to get permission from your trustee before making an application. They're more likely to approve your finance deal if you can show that you have been responsible with money and have a genuine need for a new vehicle.
If you're currently in a protected trust deed, you'll usually need to get a formal letter from your insolvency practitioner, explaining the reasons why you need a new car. For example, if your current vehicle is old and unreliable, or if it's been written off and you need a vehicle to get to work.
Does a trust deed show on your credit file?
Yes, a Scottish trust deed will show up on your credit file. Like other debt solutions, it will be listed on your financial record for six years from the date the trust started, which may also affect your credit score during this time.
Will a trust deed affect my credit rating?
A trust deed will affect your credit rating, staying on your credit file for six years from the date the trust deed started. However, whilst this will negatively impact your overall credit score, keeping up with your regular repayments will enable you to build up your credit file again.
Find out more about how to boost your credit score here.
How long after a trust deed can I get credit?
Once your trust deed has expired, you can technically start to apply for credit anytime. However, like most debt solutions, a trust deed will stay on your credit file for a total of six years from the date it started. So if your trust lasts for four years, it will stay on your financial record for a further two years.
You could find it harder to get car finance during this period of time, but you may still find some lenders that will fund you. However, as a trust deed can negatively affect your credit score, your interest rate may be higher.
If you can, it may be worth waiting to build your credit score up before making an application, but we understand this may not be possible for everyone. Otherwise, you're best searching for a specific bad credit car finance lender.