The Trust Deed and the Note

Securing the Trust Deed Note

Let us first differentiate a Trust Deed from a Note. The Note is a document that defines a loan. It contains the terms and conditions of the loan. The provisions of a loan including methods of payment and possible penalties and other conditions are stated within the Note.

A Trust Deed (or Deed of Trust) is a securing mechanism for the loan that the Note creates. The Note may make a debt legitimate but without a Trust Deed the loan is not secured against anything tangible. Without a Trust Deed Note, lenders will have to go through a length judicial foreclosure  in order to collect on a defaulted loan.

Loans that are commonly secured by Trust Deeds are home and automobile loans. The holders of the loans can repossess the properties without going to the courts as long as they are doing so in satisfaction of the provisions contained in the Note.

There are companies and individuals making a living with Trust Deed investment. This sort of investment has the potential for good gains as long as people know what they are doing. Low risks can be expected with ventures such as this. Finding individuals and agencies that sell trust deeds is commonplace. It is important to remember that having the Trust Deed is not enough.  One must also make sure they have access to the Trust Deed Note.

A Trust Deed investment typically involves three parties. A lender, borrower and a trustee. The functions of the lender and borrower do not need any explanations. It falls on the trustee to hold the Trust Deed used to secure the loan. Once the borrower defaults on the loan, the lender will then gain possession of the Trust Deed if all conditions are satisfied.

When investing in Trust Deeds, parties can either purchase loans or directly sponsor a loan. When purchasing Trust Deeds, do not neglect theTrust Deed Note. There have been cases of borrowers getting free of debt obligations when the investors that purchased their loans neglected to secure the Notes as well.

Trust Deed investors should also check every detail about the properties against which the loans are secured. Be sure to check if there are legal entanglements or potential complications regarding the properties or the borrowers.