Individual Voluntary Arrangements, also known as IVAs, can help you reduce your debts without resorting to debt collection measures. They are a flexible solution that can be tailored to your individual needs.
An IVA is a debt relief order that will allow you to make affordable repayments over a period of time. The average IVA lasts five years, though it can be longer depending on your circumstances. You can get a free consultation with a debt adviser to find out if an IVA is right for you.
You may be eligible for an IVA if you owe at least PS10,000 in unsecured debt. This includes credit card, loan, and debts that are not tied to an asset, such as council tax arrears. However, if you owe more than this, you will likely be asked to release equity in your property, if you are not already in a mortgage.
A typical IVA will allow you to release up to 85% of the value of your property. This is often called “free equity.” To calculate your available equity, you will need to deduct the value of your mortgage from your house’s value. Once the five-year term is up, the remaining debt is written off.
While you are in an IVA, you will still be able to make your mortgage payments. If you can’t, the IP will work with your lender to try and negotiate a payment reduction. Even if your lender refuses to help, you can use a cash injection to pay off your other creditors.
There are many benefits to an IVA. For one thing, it shows that you are in control of your debts. Creditors cannot contact you directly and are not allowed to increase the amount of interest you pay on your debt.
In addition, an IVA will prevent your debts from increasing. When you enter an IVA, your credit report will be lowered. But, keep in mind that your credit score will go down, and you’ll probably have a harder time getting a mortgage or a loan.
A good rule of thumb is that an IVA is a wise move if you have multiple debts and you aren’t in a position to pay them off within a few years. You should also keep in mind that you might need to borrow money at a higher rate than you normally would to pay off your debts.
Another advantage of an IVA is that it can be set up relatively quickly. You can usually have an IVA proposal submitted to your creditors in as little as six weeks. Your lender and your assigned IP will be notified of your new arrangement.
However, an IVA is not for everyone. Although you can usually pay off your debts in a matter of years, you will need to be able to afford the required monthly payment. Plus, your IP will be reviewing your finances on a regular basis, and you will be expected to adhere to the rules of the deal.
What is an Individual Voluntary Arrangement? was first seen on Help with My Debt