Interesting question TDA. I believe emotions - v - logic come into play here, depending on the individual. And of course, how much they understand about the TD remaining for six years on your record anyway.

It may also depend on inheritances, career options etc. of each individual.

My company offered to loan me the money (interest free) to finish it early because they could see how it had affected me psychologically. My Trustee would not accept an early repayment.

Because of the debt that caused the TD in the first instance, I would have assumed no loan was available to me.

However, if it was readily available to me, I may have been curious enough to do some calculations - and, if the, figures seemed equitable and the timeline much the same, I may have considered it.
If it was hugely more expensive and a longer timeline I would not have considered it. And even if I had considered it, I doubt if I would have gone down that route due to the significance of me having to enter into a TD. The TD was secure. The loan may have brought more problems.

Hope that makes sense.

Hi TDA,

Interesting you have brought this up

I was providing advice to a client a couple of weeks back who had very recently signed a Trust Deed with another firm (not Kevin's). The client is actually the husband of a friend of mine.

The client advised me that the rep explained a Trust Deed and told them pretty much what you have posted here in that 2 years into the Trust Deed the client would have the option of taking a loan out to clear the remaining payment under their Trust Deed and at that point would be released from the Trust Deed and debt free. They also advised the client that at this point i.e. the 2 year mark as they would have cleared their debts off their credit rating would start to repair itself. They also advised the client that any joint debt would be written off under Mr Trust Deed. Mrs had not entered into one. I explained that Mrs would be liable.

I explained to the clients that I didn't think this could technically happen as the loan would need to be sufficient to clear the total debts including interest. They would end up paying back much more than they would have if the continued with the Trust Deed payments. Obviously this is depending upon the circumstances remaining the same.

This is covered in legislation.

Under the Protected Trust Deeds (Scotland) Regulations 2013, Section 8, Payment of Debtor's Contributions it advises the following:

Section 3 below:

Payment of debtor's contribution

This section has no associated Policy Notes

8.ÔÇö(1) Where this regulation applies, the trust deed must state that the debtor must, during the payment period, pay the debtor's contribution from income at regular intervals.

(2) The payment period isÔÇö

(a)a minimum period of 48 months beginning with the date on which the trust deed was granted;

(b)such shorter period as is determined by the trustee; or

(c)such longer period as isÔÇö

(i)determined by the trustee where there is a period during which the debtor did not pay the debtor's contribution; or

(ii)agreed by the debtor and the trustee.

(3) The trustee may determine a shorter payment period only if, in the opinion of the trustee, payment of the debtor's contributions (from income or otherwise) during the shorter period would allow distribution of the debtor's estate to meet in full the total amount of the debtor's debts (including interest) at the date on which the debtor grants the trust deed.

(4) Where the debtor is a living individual, the debtor's contributions from income must be such as to result over the payment period in the payment of a sum less than the total amount of the debtor's debts (including interest) at the date on which the debtor grants the trust deed.

(5) In calculating the debtor's contributions from income for the purposes of paragraph (4), the whole of the debtor's surplus income over the amount allowed for expenditure in the statement of the debtor's income and expenditure supplied under regulation 10(1)(d)(ii) must be applied.

It's an interesting thought and I'm sure there are pros or cons but unless they can repay their full debts plus interest I can't see it being possible as you say with the difference in rules.

Definitely a very different situation in terms of the rules David - thanks very much for expanding on that here as you have.

The thing that mostly caught my attention this morning though was the issue Firewalker has highlighted and described in a nutshell very well, "emotions versus logic".

Really interested to hear from others how they'd act if presented with this option...

Hi TDA,
I am quite alarmed that there is a company out there offering people who are tackling their debt further credit to pay off a legally binding agreement! I can completely understand Firewalkers emotion vs logic reasoning and the fact that you may well end up paying far more, for far longer than you would with your Trust Deed. Personally I wouldn't have taken this opportunity if it had been given to me. I have spent the last 5 years facing my debts by signing a Trust Deed and have spent the last 9months of that steadily repairing my credit file and building myself a new reputation with potential lenders for the future. Taking out a loan (which is very likely to be with a very high interest rate) would be crazy as it may make potential lenders feel you are not taking your position seriously if you are willing to take out a further large debt whilst in a Trust Deed. Maybe I'm wrong but, that's my opinion.

I would not have taken this option. I signed my TD knowing I had 36 payments to make and that would be it. Stick to the agreement and it would be over with no complications. Factoring in another loan which could take longer to clear and cost more seems like a crazy idea to me.

Nope, I don't think I would even have entertained this option....

However I can see how some people could be attracted to it - the dangling carrot so to speak; credit rating starting to improve etc.

I think having the security of knowing that I had 36 monthly payments of a set amount and at the end of it that would be that, would have taken precedent over an improved credit rating!

So the interest rate is nearly 30%, with a £200 fee on top of that.

In money terms the winners seem most likely to be the insolvency practitioner, the creditors, and the lender. All paid for by the borrower.

We do however quite often hear from people here who feel very trapped in their trust deed. I wonder whether the financial cost of such a loan will feel worthwhile to some people who just want out.