Secured Loans - Debt Advice And Support

Secured loans require a person to sign something in their possession against the loan. The reason it is called a secured loan is because the creditors can take possession of that which the credit was taken against if the loan repayments are not made.

When people secure credit against an asset they are generally able to get more in return. An example of this would be when someone takes out finance against the equity they own in their property. They could find that at time they are able to apply for more money than they would if they weren't to secure it against the property. This is usually because the creditor feels that the person is less of a risk and they will be able to recover the amount owed if they fail to make payments.

Many people have seen the benefits of secured loans and have managed to pay back what they owed without having their possessions being reposed. However this isn't always the case and in some instances a person can find themselves struggling to manage their finances if they lose a job or have other personal problems.

The main disadvantage of secured credit are those people who do not manage to pay back what they owe may find themselves at risk of losing their assets. Sometimes the temptation of a large sum of money can be too much to resist. This is especially true of those who have refinanced because they are in debt and unable to find another solution which could help them.

Those who have refinanced in order to repay other debts can find themselves owing even more than they did originally. There is a number of debt solutions which can help those who have found themselves in this situation. When trying to asses which of these solutions is most suitable it is advised to speak with a debt advice charity/company. The solutions which can help are;

General Advice - This is best for those who may need to cut back on expenses but are not suitable for any other help 

Debt Management Plan - this can arrange for regular payment to be made to the creditors

IVA - For those who are unable to pay back what is owed in full but is not suitable for bankruptcy. This is only available to people living in England, Ireland and Wales.

Protected Trust Deed - Similar to an IVA but is only available to people living in Scotland. The main difference is simply the criteria needed to meet the requirements for these solutions.

Bankruptcy - The final solution when all else fails is to petition the court to legal declare bankruptcy. This is only available in England, Ireland and Wales 

Sequestration - This is the same as bankruptcy except only available in Scotland. The only difference between these solutions is the criteria which is required to meet them.

LILA - A new debt solution which has been introduced to help people who could afford the cost of making themselves bankrupt, still manage to be declared insolvent. This is only available in Scotland

Debt Relief Order - Same as LILA except for the criteria need to be met. This solution is only available in England, Ireland and Wales.

The trade association whose members account for approximately 98% of all UK mortgage lending has stated that new house loans returned to the same levels as December 2007 levels. In addition, the remortgage market has seen a stabilisation of growth over the same period of time. According to data published by the Council of Mortgage Lenders, the number of loans that went to home movers rose by 15% from September to October 2009. A significant number within that group opted for a tracker mortgage loan, a loan where the interest rate rises and falls in line with the Bank of England base rate. This is believed to be an indication in borrower confidence that rates may remain low for the long term.

"Robbing Peter to Pay Paul"

There are millions of people across the UK who have debt, however that debt is manageable and whilst we might begrudge paying the interest each month we know it's possible to repay our debt eventually.

Some people become entrenched in debt, struggling to find the solutions to resolve long term financial problems, often resulting from another issues such as a marital breakdown or loss of job. When the difficult financial times come, it's easy to understand why people would want to resolve the problems themselves - using their own initiative to move credit card balances to get the best deal, avoid paying high interest and charges and ultimately pay off their debt.

The difficulty for many people arises when there is no longer any credit card available, no loan or further credit on offer. When financial times get tough, it's important to accept that in some instances qualified debt experts could be required - not another loan!

When debt problems are coming through the letter box or via the telephone;

- Face it head on
- Stop looking for a loan
- Ask for debt advice from a qualified debt advisor at a charity, such as Debt Support Trust or Citizens Advice Bureau

Debt Help and Support - IVA

While IVA's have been increasing most people are still unaware of what this debt solution has to offer and how it can benefit them. In this article we will discuss what an IVA is and how it can help those facing financial problems.

IVA's were created to help people pay back a portion of their debt and to stop people from having to declare themselves bankrupt. IVA stands for Individual Voluntary Arrangement, this is a formal debt solution which is legally binding once it begins. Creditors like IVA's because they generally receive more of they are owed than if the person in debt were to file for bankruptcy. Debtors like IVA's because it doesn't have as a severe effect on a persons life i.e they are able to keep their house, the payments are more manageable and while their credit rating is badly affected it isn't as bad as it would be with bankruptcy.

Only qualified professionals can administer an IVA. This is usually an insolvency practitioner but there are a number debt advice charities who can offer debt advice which would not cost anything to those requesting help. These debt advice charities can help to package an IVA for the debtor. Once a person has spoke to a debt advice charity they will be taken through an income and expenditure. This will show how much money the debtor has left each money to pay towards creditors after all expenditure is taken from the income. Which will help to ascertain just wither or not they are suitable of an IVA. If advised that an IVA is the best debt solution then the debt advice charity would pass all the case to an Insolvency Practitioner (I.P). All these details are put to your creditors along with a proposed monthly payment.

If a person owns their own property, then any equity they have available in their house will be included into the IVA proposal as part of the repayment offer. The insolvency practitioner will require a person to release any equity before putting an offer forward. This will then be put into the IVA fund which is offered to the creditors. If the property is jointly owned then only the debtors share of equity is normally considered under the IVA.

For the IVA to be accepted then more than 75% by value of unsecured creditors vote in favour of the IVA then it has to be accepted by all the unsecured creditors. If a person has 4 creditors and one of them is owed 76% of the total amount in unsecured debts then they will have the their vote would be the one that counted the most. So if they refused the whole IVA would be rejected and if they accepted then the IVA could begin, this would mean that it didn't matter what the other 3 creditors voted.

If the IVA is rejected then there is still chance for the debtor. This is because they do have an opportunity to re-submit an improved IVA proposal. If this is not an option, due to funds or other demands then it is best to go back and speak with the debt advice charity again and they can help to find another solution. It maybe that they will help setup an informal debt management plan. It is strongly advised that no IVA payments are missed but in most cases this will be understood and possibly written into the agreement. The IVA is a legally binding agreement. If payments are missed then there is a risk that the trustee can force bankruptcy. If a persons personal circumstances change then an IVA can be altered to reflect this as they can be flexible depending on the circumstances.

Scottish Debt Solution - Protected Trust Deed

Scotland has an independent debt solution for people who face financial problems. It's an agreement between debtors and creditors for a debt repayment. This option was introduced to help people without them having to declare themselves bankrupt and to help creditors regain a portion of the money they are owed.

If a person is on the brink of bankruptcy it would be advised to seek professional help to asses whither they are suitable for a trust deed. The first thing people should understand is how a Trust deeds works, and what the criteria for this debt solution is. If a person has high unsecured debts and are unable to repay these then it could be the best option for them. While a Trust Deed is likely to have a severe impact on a persons credit rating, it is considered a better solution than bankruptcy A person owes 3 creditors a total of £25,000, if this were divided into;

£15,000 is owed to 1st creditor

£5,000 is owed to 2nd creditor

£5,000 is owed to 3rd creditor

This would mean that the 1st creditor would have the majority right and if they refused then it would not be accepted even if the other 2 creditors voted in favour. So long as the creditors agree to accept the payments then the debt solution can begin however they can object the offer within 5 weeks.

A proposal can be accepted if no objection is made or half of the creditors don't object. A creditor is official considered to be notified if a public notice is made in relation to the offer and they don't decide to make any objections. Once the offer has been accepted by the creditor then the trust deed becomes protected because it is then that it is legally binding. Trust deeds are legally binding so as long as a person does not default then the creditors will not be able to change their decision at a later date.

A trust deed can work out well for both the creditors and the debtor because the other solution would be bankruptcy, mean the creditors would get even less. Something everyone must know before going into a trust deed would be that all assets that are unessential to the creditor can be sold by the trustee and included into the trust fund. Commodities or vehicles can be sold if they are not used for work or any other essential need. The amount received from selling these item would then go into a pot before any proposal is made to creditors. If someone has equity in their property then this must be released. Again the money raised from this would go into the pot and once the trust deed is complete then the debtor would be better off then they would have been with an sequestrated. This is because with sequestration the debtor would be forced to sell any asset first. If a person is struggling to get a loan to release the equity then a family member would be allowed to do it on their behalf. Trust deeds help those living in Scotland to pay their debts without having to become sequestrated. While a person is likely to lose assets and possessions with a trust deed, the choice between this and sequestration is one which can't be taken lightly and leaves no choice for those who are in a financial struggle.

Introduction To Trust Deeds

A large number of people in Scotland are entering the Protected Trust Deed debt solution. This is known as the IVA in England, Wales and Northern Ireland. Last years almost 8,000 people entered a Protected Trust Deed to resolve their debt problems. In this article we'll explain who is suitable for a Trust Deed and who would not meet the criteria

What is the criteria?

You must;

- Be able to repay at least 10% of the money you borrowed over a 3 year period

- Owe at least £10,000 unsecured debt

- Be able to pay £150 towards your debt each month

An example of a Trust Deed

Steven from Glasgow is 30 and married to his wife Karen. Steven has 5 debts (2 credit cards, 2 store cards and an overdraft with his bank) which totals £30,000. Karen has an overdraft totalling £1,500. Steven and Karen has a mortgage which has £100,000 outstanding. The value of the house is roughly 100,000 - there is no equity in their house.

Steven works full time and earns £1,300 each month after tax. The monthly expenditure for Steven is £1,000. So, Steven has £300 disposable income available to pay his debts each month.

The problem is that Steven's monthly contributions to his debts are £800. As a result, Steven is having to borrow money from other credit cards to meet his money payments. A debt management plan is one solution for Steven. If he managed to freeze his interest and charges he could have his debt repaid in just over 8 years. There is also a solution called a debt arrangement scheme (Scotland only) where he could enter a legally binding debt management plan type solution.

Steven would also be applicable for a trust deed as well as sequestration. The Trust Deed would see Steven repay an estimated 30% of the debt he borrowed over a three year period. If he completed the solution he would see his interest and charges, along with the rest of the money he owed, being cleared. Sequestration would also be an option for Steven, with Steven being discharged after one year from the Sequestration. As Steven has available money he would be asked to make a contribution towards his debt for a total of three years.

All debt solutions will negatively effect Steven's credit rating.

When would the Trust Deed not be applicable

Steven would not be suitable for the Trust Deed or Sequestration if the equity in his house was more than his debt. Karen would be entitled to half of the equity in the house, however if Steven had £50,000 equity in his house, then he would be entitled to half of this (£25,000).

The £25,000 along with 36 monthly payments of £300 towards his debt would see Steven repay more money than the actual debt he had

Protected Trust Overview

There are a number of ways to become debt free for people in Scotland, including general money advice, debt management plan, Protected Trust Deed, refinancing or Sequestration.. One way in which people can solve their debt problems is with a Trust Deed.

What is a Trust Deed?

A Trust Deed is a formal, legally binding solution only available to people living in Scotland. The English, Welsh and Northern Irish alternative would be an IVA. In a Trust Deed you would repay arrangement a percentage of your debt at an affordable rate over a fixed period of time. A Trust Deed will usually last for 36 months however it can last for up to 60 months. If you complete your Trust Deed you will have a percentage of your debt cleared. Anybody entering a Trust Deed will be asked to make a monthly payment of at least £150.  At the end of the solution the money you have paid will be distributed to your creditors on a pro rate basis.  The disposable income paid each month is assessed based on your income and expenditure. 

The Trust Deed process?

If you think a Trust Deed  is right for you then you should consider speaking to a debt advice charity who can point you in the right direction. You would sign the Trust Deed which would then be offered to your creditors. The Trust Deed is also advertised in a publication called the Edinburgh Gazette. If your creditors accept the proposal your Trust Deed will become legally binding and ‘Protected’. The Protection binds both  you and your creditors to the Trust Deed terms.

What’s the criteria for a Trust Deed?

You must;

- Be able to repay at least 10% of the money you borrowed over a 3 year period

- Owe at least £10,000 unsecured debt

- Be able to pay £150 towards your debt each month

Benefits of a Trust Deed?

There are advantages and disadvantages of a Trust Deed. You will asked to make one affordable payment towards your debt each month. The arrangement made in the Trust Deed with your creditors will last for a certain amount of time and it will be fixed so you can see the ‘light at the end of the tunnel’. As long as you fulfil your end of the agreement all interest and charges will become frozen and written off  at the end of your solution. Another benefit is your creditors can  no longer take any action against you once the Trust Deed is Protected. You will only repay a percentage of the money you owe – a minimum of 10%  however the more you repay the more likely your creditors are to accept your proposal.

What are the disadvantages?

There are a number of disadvantages to a Trust Deed. Your credit file will have a default on it which will last for 6 years. This would mean obtaining credit in the future will be difficult. You will generally be able to retain your property, however you will have to release any equity within your assets. You will not be able to remain as a director of any organisation and would have to relinquish this position in a Trust Deed. You may need to sell your cars and downsize, however this is evaluated on a case by case basis. Any assets you own worth over £1,000 may need to be sold or the insolvency practitioner may look to release the equity.

How do I get a Trust Deed?

In 2010, over 9,000 people entered a Protected Trust Deed. The Trust Deed is not suitable for everybody however for people with serious debt problems it may the right option. To get a Trust Deed you first want to make sure there are no other solutions to debt which would be less harmful to your credit rating. The best people to speak to about a Trust Deed is a debt charity who will give you independent advice.