A trust deed can leave you wondering how you'll replace a car you rely on for work or family. And the answer isn't the same for everyone. It depends on whether the trust deed is still running, what your trustee agrees to and how your budget looks now.
Before you apply: speak to your trustee first. Free, confidential debt advice is also available, and we list the services near the end of this page.
Trust deeds only exist in Scotland. If you live in England, Wales or Northern Ireland, the nearest equivalent is an Individual Voluntary Arrangement (IVA).
Car finance with a trust deed is possible only if your trustee agrees and a specialist lender accepts you. So for most people, waiting until the trust deed ends is the safer route.
A trust deed stays on your credit file for 6 years from the date it starts. It lowers your credit score for that time, and most mainstream lenders decline while it shows. That leaves specialist lenders, who usually offer Hire Purchase (HP) at a higher interest rate.
Car finance after a trust deed is easier. Once you're discharged (formally released from the debts the trust deed covered), lenders can see a clean payment record building. That's why we'd wait for discharge rather than take on new credit halfway through.
A trust deed is a formal debt solution in Scotland where you pay a trustee an affordable amount each month, usually for 4 years. At the end, the unsecured debt that's left is written off.
The trustee is a licensed insolvency practitioner who runs the trust deed and pays your creditors. Once it's protected, your creditors deal with the trustee instead of you. They can't add interest or chase you, as long as you keep to its terms.
A trust deed becomes protected when not enough creditors object to it. The Accountant in Bankruptcy (AiB) then records it on the public Register of Insolvencies, and it binds every creditor named in it. But not everyone can set one up, because you need debts of more than £5,000.
Scotland's other formal options are the Debt Arrangement Scheme (DAS) and sequestration, which is Scottish bankruptcy. In England, Wales and Northern Ireland, the nearest equivalent to a trust deed is an IVA.
Yes, in practice you need your trustee's agreement before you apply for car finance during a trust deed. No law bans borrowing outright. But the terms of your trust deed are likely to limit new credit, and breaking them can cost you your discharge.
Your trustee is likely to want proof that the car finance won't put the trust deed at risk. That usually means showing:
If the car is a convenience rather than a need, the answer is likely to be no. And a car payment changes the budget that sets your contribution. So if the new payment means you can't keep up, the trustee can refuse your discharge and your debts aren't written off.
Tell the lender about the trust deed, too. It's on your credit file and the public register, so the lender will find it anyway.
You can usually keep your car in a trust deed, as long as its value and any finance payments are reasonable for your needs. What happens next depends on how you paid for it.
| How you paid for the car | Part of the trust deed? | What usually happens |
|---|---|---|
| HP, PCP or conditional sale | No. The finance company owns the car until the final payment | The trustee counts the monthly payment as essential spending if it isn't excessive. You keep paying the lender directly |
| Personal loan | Yes. The loan is unsecured debt, so it goes in | The car is yours, so the trustee treats it as an asset |
| Cash, or the car is paid off | Yes. The car is an asset | You usually keep a modest car you need. A high-value car may have to be sold |
A car's equity is the part the trustee looks at. It's any value above what you still owe the finance company, and the trustee can ask for it if it's large. PCP is usually based on Hire Purchase, so the same rules apply to it.
If the equity is too high, you may still have ways to keep driving:
Already handed a car back and still owe a shortfall? That shortfall is unsecured debt, so it can go into the trust deed.
Borrowing during a trust deed is risky because new debt isn't written off when you're discharged. You'd still owe all of it after the trust deed ends.
It's likely to cost more, too. Lenders that accept applicants in a trust deed price for the risk, so the APR (the yearly cost of borrowing as a percentage) can be much higher than a mainstream deal.
The bigger danger is to the trust deed itself. If extra repayments stop you paying your contributions, the trustee can refuse your discharge. Worse, a trust deed that fails can end in sequestration.
Secured loans, logbook loans, high-cost short-term loans and guarantor loans are the riskiest kinds of borrowing during a trust deed. Each one adds risk on top of debts you're already paying off.
Buying a car outright during a trust deed is possible if your trustee agrees, and it avoids interest, credit checks and monthly payments. But the money has to come from somewhere your trustee accepts. An inheritance, a windfall or other new money that reaches you in the first 4 years can be claimed for your creditors.
So ask your trustee before you spend anything. Keep the car modest, too, because a high-value car can count as an asset.
Car finance after a trust deed is possible from the day you're discharged, because no law sets a waiting period. Yet discharge isn't automatic. Your trustee applies to the AiB once you've met the trust deed's terms, and the AiB records the date on the Register of Insolvencies.
Keep your discharge letter. Lenders may ask to see it.
The trust deed stays on your credit file for 6 years from its start date, not from discharge. Take a trust deed signed in March 2022. Over the usual 4 years, it ends in March 2026.
It then drops off the credit file in March 2028. That leaves about 2 years of applying with it still showing, which is when specialist lenders matter most. Once the entry goes, mainstream lenders are more likely to consider you, as long as your record since discharge is clean.
Paying a trust deed off early doesn't bring that date forward, because the 6 years run from the start date.
Specialist lenders look at how you manage money now, not only at the trust deed itself. They usually check three things:
It helps to have 3 months of payslips and matching bank statements ready.
A modest, reliable car on Hire Purchase is the deal most likely to be approved. With HP, the lender owns the car until your final payment, which lowers its risk. And there's no large final payment to plan for.
Personal Contract Purchase (PCP) is harder to get approved. Its balloon payment leaves a big optional bill at the end of the agreement, and a trustee is likely to be wary of it.
Where can you get free debt advice in Scotland?
Free debt advice in Scotland is available from charities and public services. They can check whether a trust deed, DAS or sequestration suits you, and what new borrowing would mean for your plan.
In England and Wales, StepChange, National Debtline and Citizens Advice cover IVAs, debt management plans and bankruptcy.
A broker can help with trust deed car finance by checking one application against several lenders, including specialists. If your trustee has agreed in writing or you've been discharged, we can search our panel for you.
We use a soft search to check your eligibility, so there's no impact on your credit score at this stage.
