Trust deed is a legal agreement entered into between the buyer and the lender of the loan. It is a legal agreement that binds the creditor and debtor to make monthly for 36 months for pre agreed amount and any remaining unpaid or unaffordable debt is written off thereafter.

If you have never come across the trust deed agreement then you might have few questions about it like how it works, how it is formed etc.

A trust deed is an agreement that contains

• The trustier that is you or the borrower of the loan
• The trustee that is an which holds the title legally
• The beneficiary that is lender or creditor of the loan amount

A trust deed is an instrument that defines the following:

• The original loan amount
• The both parties of the loan
• The late fees that will be applied in case of late payments
• Legal procedures that will taken
• The legal description of the property that has been used as collateral for obtaining the loan amount.
• Inception and maturity of the loan
• Any conditions that will impact the loan in case you take any actions like prepayments or interest rate changes etc.

The trust deed can be established for any kind of secured debt like mortgage. Establishing trust deed is complex procedure and can take up to few weeks as there is no court actions are involved. When trust deed is established against mortgage, the trustee holds the title of the property which is laid as collateral for the loan.

As the court action is not involved, the trustee has a right to sell the property for the benefit of beneficiary in case of trustor fails to make regular monthly payments. The trustee will issue notice of default to borrower with respect to his or her delinquency. In this case the trustor usually gets 90 days to cure the loan and pay all the penalties. Once the time is up the trustee will initiate the sale process by publication of sale of the property in newspaper for at least 3 weeks and then property will be auctioned at the courthouse steps.

As with any option trust deed also have pros and cons. The benefits of trust deed include:

• Even after entering into trust deed agreement, you remain the control of your properties and finance.
• One needs to pay back the amount that you can afford with in 36 months period of entering into trust deed agreement.
• You have only one monthly payment.
• The remaining debt at the end of the term will be written off.
• With trust deed, you lock the interest charged on the debt as the creditors can not add any further interest or charges to your debt.

The disadvantages include:

• With trust deed, your credit ratings will be damaged
• Upon failure to make repayments regularly, it can lead to bankruptcy proceedings.
• You can not take up the responsibility as a director of limited company.

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