One of the most worrying aspects for anyone considering entering into a debt solution is what will happen to their assets.
The fear of what may happen to their homes and cars can be one of the reasons why people put off seeking help sooner than they do.
Trust Deed Scotland® always suggests that it’s best to speak to a qualified, expert debt advisor for personalised advice, as usually there is a solution that resolves anyone’s financial situation.
Where an individual is most concerned that they may have to give up their car as a result of entering a statutory debt solution, reassuringly this is typically an unlikely scenario.
Can I Keep My Car In A Trust Deed?
If you need a car, you can usually keep the car during your Trust Deed term.
There are many reasonable needs for a vehicle during a Trust Deed – for commute purposes or for work. Even living remotely or taking children to school counts as a reasonable need to maintain a car during a Trust Deed. This includes vans and motorbikes too.
If car finance is already secured upon your vehicle under an existing arrangement, you’ll keep maintaining the payments. This is because if you fail to make the payments, the car may be repossessed by the car finance lender otherwise.
When entering a Trust Deed, an allowance gets added in your monthly budget to continue paying the secured car finance, as long as your monthly finance payment isn’t deemed excessive and that you have a fair need for the vehicle.
My Car Is An Asset?
If you own a car, it is regarded as an asset. Under a Trust Deed, your Trustee take account of any assets you own and where vehicles are concerned, a £3,000 valuation threshold applies.
Where your car is valued less than £3,000, there are generally no issues at all. Where your vehicle is valued at £3,000 or more, a written plan will be put in place.
You will become the owner of the vehicle when you have complete your car finance term but you would also consider how much the car would be valued after a period of 4 years, the typical length of a Trust Deed term.
You may also consider downgrading the vehicle before you proceed with a Trust Deed.
Car Finance Shortfall Debts?
If you had a vehicle under a credit agreement and the car was repossessed due to handing the car back early, or due to not being able to afford the finance for whatever reason, there may be a car finance shortfall debt which will then be classified as an unsecured debt.
In any instance where a car finance shortfall debt exists, the unpaid debt will be added to your Trust Deed as a creditor.
Can I Get Car Finance With A Trust Deed?
It’s a question we’re asked at Trust Deed Scotland® quite often from people considering entering a Trust Deed and the answer is yes, you can get car finance.
However, entering a Trust Deed will make accessing any kind of credit quite difficult. Any new lender will usually charge you a higher rate of interest, which can then eat into your agreed disposable income.
Therefore, it’s unlikely that you can get car finance during a Trust Deed, but not impossible.
During your Trust Deed term, you will need to seek permission from your Trustee to obtain any form of credit. Not informing your Trustee breaches the terms of your agreement and could lead to your Trust Deed failing.
Your Trustee will decide on whether your request to take out car finance is reasonable. The Trustee will decide if taking out a vehicle on finance is suitable for you based on your income and expenditure. Your Trustee is likely to approve your request if the car finance is sustainable with your current budget and living costs. Special consideration will be given where you require the vehicle for work purposes.
Can I Get Car Finance After My Trust Deed Has Complete?
Yes, once you have finished your Trust Deed term, you are free to rebuild your credit rating and borrow funds as you go.
Once you have been discharged from your Trust Deed you will be removed from the Insolvency Register. However, the Trust Deed shall remain on your credit file for 6 years from the date you took out your Trust Deed. Therefore, if your Trust Deed lasts the standard 48 months, it will remain on your credit file for a following 24 months.
This impacts your credit score, which can make it more difficult to find a suitable lender than if you had no financial discrepancies. Waiting until you have rebuilt your credit score may be a more suitable option for you when considering taking a car out on finance as you will be able to access better market rates and deals – as long you are continuing to make responsible use of credit.
If this is not an option, however, you can shop around and use comparison websites to find the best poor credit car finance lender. If you are struggling to find a company willing to approve your bad credit car finance application it may be just as beneficial to approach a credit union.
I’m Worried About My Unaffordable Debt, What Should I Do?
If you’re worried about your ability to pay off your unaffordable, unsecured debts you should seek expert debt advice.
Our team of debt specialists at Trust Deed Scotland® have helped over 20,000 people in Scotland with their debt problems. Our expert, non-judgemental advice is personalised to your situation.