While a lucky few may have access to good public transport links, many more find that their personal movements require access to a vehicle. When debt becomes an issue, people may worry whether they’ll be able to keep their car if they start a trust deed.
A vehicle is an asset with value; in some cases of considerable value. If you own your car, you may be worried that it will be taken away if you start a trust deed. This isn’t generally the case. A trust deed in Scotland usually involves making a contribution from your income each month. To earn an income, a lot of us need a car to get to and from work.
Assuming you have a reasonable need for the vehicle, you will generally be able to keep it. This is one of the advantages of a trust deed.
If you sign a trust deed and your car is worth more than £3000 you will have an extra liability to the trust deed for this asset. You’ll need to work with the trust deed provider to decide how this will be dealt with. There are a few ways to handle this extra liability, including:
Each trust deed solution will mean that you keep a car, though there may have to be something of a compromise.
So long as there is a reasonable need for the car, and the monthly payment isn’t excessive (for an unnecessarily luxurious vehicle for example), the trust deed provider should allow you to keep the vehicle throughout the duration of your trust deed. The monthly payment for the lease or hire purchase will be included amongst your monthly expenditure that is used to work out your trust deed payment.
You should be aware that some lease or hire purchase contracts may include a clause that means they can take the car back if you become insolvent; unfortunately a trust deed is a form of personal insolvency. Most companies will not enforce this clause because of your trust deed so long as you keep the payments up, but a bit of advance research into how they’ll respond to a trust deed may provide some reassurance.
This situation can be a little more tricky. If you plan to sell your vehicle and buy a new one you’ll want to get the go-ahead from your trust deed provider first. If someone else helps with the purchase of the new vehicle during your trust deed please remember that a car of increased value may be considered to be an acquired asset in your trust deed.
If you’re dealing with a trust deed and you’re looking to lease a new car or get one on hire purchase you may find that there are difficulties with credit scoring. There are some lenders that are open-minded about poor credit scores but this will generally be reflected in the interest rate charged. Some people are lucky enough to have a friend or family member who is prepared to obtain a hire purchase or lease vehicle on their behalf while they’re in a trust deed.
Some people would be well advised to take steps, in advance of signing a trust deed, that make them feel comfortable that they have access to a car that will see them through the trust deed without undue hassle or expense along the way.