Can you get car finance on a trust deed in the UK?

In the UK, a trust deed is a legally binding agreement between a debtor and their creditors to repay their debts over a period of time. Trust deeds are often used as an alternative to bankruptcy and can be an effective way for individuals to manage their debts and get back on track financially.

Yes, it is possible to get car finance while you are in a trust deed, but it may be more difficult to do so due to the impact a trust deed can have on your credit score and the lender's risk assessment of your application.

If you are considering entering into a trust deed, it is important to understand how this might affect your ability to obtain car finance. Here is some information to consider if you are considering getting car finance while you are in a trust deed.

How a trust deed affects your credit score?

One of the main ways in which a trust deed can affect your ability to get car finance is through your credit score. A credit score is a numerical representation of your creditworthiness based on information from your credit report. Lenders use credit scores to determine the risk of lending to you and to set the terms of any loans you may be offered.

When you enter into a trust deed, this information is recorded on your credit report and may have a negative impact on your credit score. This is because a trust deed is a formal agreement to repay your debts over a period of time, which may be seen as a sign of financial instability. As a result, your credit score may be lower while you are in a trust deed, which could make it more difficult to get car finance.

However, it is important to note that the impact of a trust deed on your credit score may vary depending on the lender. Some lenders may be more willing to consider offering car finance to individuals in a trust deed, while others may be more cautious.

Can I keep my financed car in a trust deed?

If you have a financed car, and you enter into a trust deed, you will typically be required to include the car in the trust deed as an asset. This means that the car will be considered part of your overall financial situation and may be used to help pay off your debts.

However, this does not necessarily mean that you will have to give up your car as part of the trust deed. In many cases, you may be able to keep your car as long as you are able to make the required payments on the car loan. This may involve making additional payments on the car loan as part of your trust deed payments.

It is important to discuss your specific situation with your trust deed provider or financial advisor to understand how your financed car will be affected by the trust deed.

Why is it dangerous to borrow whilst in a trust deed?

While a trust deed can be a useful tool for addressing debt problems, it can also be risky to borrow more money while you are in a trust deed.

One reason why it can be dangerous to borrow while in a trust deed is that it can increase your overall level of debt. If you are already struggling to manage your existing debts, adding more debt on top of that can make it even harder to keep up with your payments and may put you at risk of defaulting on your trust deed. This can have serious consequences, including the potential for legal action and damage to your credit score.

Another reason why borrowing while in a trust deed can be dangerous is that it may be more difficult to get approved for new credit. Lenders may be less likely to approve you for a loan or other form of credit if you are in a trust deed, as they may see you as a higher-risk borrower. If you are able to get approved for new credit while in a trust deed, it may come with higher interest rates or fees, which can make it more expensive to borrow.

It is generally a good idea to avoid taking on additional debt while in a trust deed and to focus on paying off your existing debts as agreed in the trust deed.

Can I get car finance after my trust deed has been completed?

It is possible to get car finance after your trust deed has been completed, but it may be more difficult and potentially more expensive than getting car finance before or during a trust deed. A trust deed is a formal agreement in which you agree to pay off your debts over a set period of time, and it can have a negative impact on your credit score. This can make it more difficult to get approved for car finance, as lenders may see you as a higher-risk borrower.

However, there are still options available to you. Some lenders may be willing to consider your application for car finance if you have made progress in rebuilding your credit since completing your trust deed. It may be helpful to work on improving your credit score before applying for car finance, as this can increase your chances of getting approved and may help you secure a more favourable interest rate.

How to improve your chances of getting car finance?

If you are in a trust deed and are considering getting car finance, there are a few things you can do to improve your chances of being approved:

1. Shop around: It is essential to shop around and compare car finance options from different lenders. Some lenders may be more willing to consider offering car finance to individuals in a trust deed than others.
2. Build up your credit score: While you are in a trust deed, you can work on building up your credit score by making all of your payments on time and reducing your outstanding debts. This may help to improve your credit score and make you a more attractive borrower to lenders.
3. Consider a secured loan: A secured loan is a type of loan that is secured against an asset, such as a car. If you are in a trust deed and are having difficulty getting car finance, you may be able to consider a secured loan as an alternative.
4. Consider a co-signer: If you are having difficulty getting car finance on your own, you may be able to consider getting a co-signer to help you secure the loan. A co-signer is someone who agrees to take on responsibility for the loan if you are unable to make the payments.
5. Be honest with the lender: If you are in a trust deed and are applying for car finance, it is important to be upfront and honest with the lender about your financial situation. This may help to improve your chances of getting car finance, as the lender will be able to assess your application more accurately.

Conclusion

In conclusion, getting car finance while you are in a trust deed in the UK is possible, but it may be more difficult to do so. The impact of a trust deed on your ability to get car finance will depend on the lender and may be affected by your credit score.