Most debt solutions will have a big impact on the way you manage your finances - and an IVA (Individual Voluntary Arrangement) is no exception.
With most IVAs, you`ll be required to pay as much as you can towards your debts every month, based on what`s left of your income after other essential costs have been accounted for. Unfortunately, savings don`t come under `essential costs`, so you will have to put saving on hold until after your IVA has come to a close.
An IVA is a formal agreement between you and your unsecured lenders that allows you to repay as much of your unsecured debt as you can afford over an agreed period (usually five years).
On a typical IVA, you`ll be making regular monthly payments for this time, paying whatever you can afford after other essential expenses have been covered (mortgage/rent, utility bills, food, etc.). If you`re a homeowner, you`ll probably have to release equity from your property as well.
On successful completion of the agreement, your remaining unsecured debt will be written off, leaving you legally debt-free (as far as your unsecured debts are concerned).
As we said previously, an IVA will require you to pay the maximum you can afford towards your debts on a monthly basis. This will leave you with little money for anything other than your essential costs.
This will mean you won`t be able to save, and in fact if you have any existing savings you will probably be required to put these towards your debts as part of the IVA.
An IVA will also have a significant impact on your credit rating, which will make borrowing money more difficult for six years after it starts (as this is how long it`ll remain on your credit history).
But all debt solutions have their downsides, and it still stands that if you`re struggling with unmanageable debts and don`t want to go bankrupt, an IVA could be your best option.
To learn more about IVAs, click here or call our expert advisers on 0800 195 2911.
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