Once you have racked up a high level of debt it might seem like a never ending burden sitting on your shoulders.
It can often seem like your repayments are being eaten away by the interest charges and so the capital is still as high as it ever was, if not higher. Levels of debt this high often become unmanageable, either because circumstances have changed so income is lower or your outgoings (including debt repayments) have crept higher.
There are numerous debt solutions available to people that are finding it impossible to manage their debts but many of them require you to take out additional finance or declare yourself bankrupt.
A trust deed has many advantages but one of the main benefits is that further interest charges and financial penalties are frozen. As soon as your trust deed has been agreed with your creditors your debts will freeze, with no further interest being added on.
How does this help me?
This helps you repay more of what you owe without getting swamped down by huge interest charges.
If you have missed payments or been late making repayments you will probably find that the cash you put towards your debt is just eaten up by all the extra charges. This can make paying debts back seem impossible.
You can break this vicious cycle by entering into a trust deed. There are eligibility criteria to contend with, but if you have debts over £10,000, live in Scotland and have disposable income to pay back some of the money you owe, you are likely to qualify.
Once the trust deed has been granted a protected status you will be free from your creditors as they are no longer able to chase you for payments and all communication will go through your trustee.
How much will it cost me?
Your repayments will have been worked out and presented to the creditors in a proposal before the trust deed was agreed. Provided that your circumstances don’t change significantly, this monthly fee will never put you out of pocket as it will have been calculated using your disposable income only.
The new monthly payment will be much lower than the amount you previously had to contend with and even though it won’t meet the demands of the creditor, no further interest or penalties can be applied.
What’s more, once your trust deed has been completed you won’t be required to make any further payments and your debts will be written off. This means that after the three years you will be completely debt free.
Entering a trust deed can solve many debt problems and allow you to rebuild your financial life. However, it is important that you realise that a trust deed is a method of insolvency and therefore does have consequences, such as a decline in your credit rating and difficulty in obtaining loans in the future.
By freezing the interest charges and penalty fees, your debt will become more affordable, allowing you to have monthly payments that you can meet on a regular basis whilst your creditors receive a portion of what is owed to them.
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John is an debt expert for www.trust-deed.com, the Scottish Trust Deed solutions company. For more advice on your debt and how a Trust Deed can help you, speak to me directly.