Trust Deeds – The Pros and Cons

Trust Deeds are documents or public records wherein specific financial accounts or properties are transferred to a trustee. There are three parties involved in a trust deeds, the trustor, which is the borrower, the beneficiary, which is the lender and the trustee, which is a different independent entity whether a person or a company.

Deeds of Trust are becoming more popular in the society right now because of its benefits to all parties. First, deeds of trust are made by private lenders and thus lending are more flexible than those of the banks and other entities. Second, investors are more secured in trust deeds because it has a tangible security loan. A trust deed needs houses and other buildings that the trustee could hold on to. This makes the beneficiary more secure when lending money because something can be seen or can be touched is there. Another benefit in deeds of trust is that once the deed of trust has become legal or has come into force the creditor or the beneficiary cannot contact the trustor in any manner. This secures the trustor in a way that the creditor will not be able to pressure him/her and it also gives in to the “confidentiality” of both parties.

However, with all these benefits and advantages, like all things in the world, deeds of trust also have its downside. Trust deeds also have some risks in all parties more specifically between the trustor and the beneficiary. Trust deeds are more popular in the society as a “debt solution” but again, people should be informed that risks are taken and that it may also be detrimental.

People should remember that when making a deed of trust they are putting something (properties) at risk if they could not pay their debts. When a trustor borrows money from the beneficiary a tangible object for security is asked, for example equities in a house. When the time comes that the trustor could not fulfill the payments, the beneficiary or the lender may own the property a hundred percent or the trustee could sell the property.

Another disadvantage when making a trust deed is that the trustor’s credit rating will be greatly affected and may lead to some problems in handling credit accounts.

In a deed of trust the trustor are required to be in a contract, usually 3 years or 36 months. In these three years the trustor is required to pay all his/her debts in the given time, failure to repay all debts may lead to foreclosures or bankruptcies. Failure to repay all debts will be on public records and may be a problem in the future for the person; it might be difficult to engage in credit accounts in the future.

Trust Deeds are indeed popular now but people should consider and think things through before making any decision in trying to solve any debt problems.

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