In order to enter into an IVA, you need to have the agreement of at least 75% of your creditors, ‘by value’, which means that the majority of your debts are included in the arrangement. As such, your unsecured creditors do not lose their rights under the Consumer Credit Act or can file for bankruptcy. However, the process is different for secured loans, as your unsecured creditors will have a right to use the law to collect their debts from you.
If you have unsecured debts, you should consider a restructured IVA as soon as possible. This type of IVA allows you to keep your credit score high while paying off your debts in an orderly manner. You can choose to include the debts from a bank, such as credit cards, as long as the account is separate from any other liabilities. However, some banks will not let you operate an account with an overdraft or credit facilities while in an IVA.
In this example, Steve’s monthly mortgage and IVA payments are both PS550. So, his equity release must cost no more than half of his monthly payments. However, the interest rate and duration of the loan are capped so that they don’t exceed half of his monthly mortgage payments. Hence, an equity release can’t cost more than half of the IVA and mortgage payments combined. However, most secured loan rates are variable.
Unlike a secured loan, an IVA will show up on your credit file for six years. Because of this, it can make it difficult to access credit, and you should make sure that you inform your IP about your early loan repayments and discuss the implications of this change with your IP. In some cases, your IP may even arrange a variation meeting if your circumstances have changed. This type of meeting will usually be necessary when you make a change to the original terms and conditions of the agreement.
As an additional benefit of an IVA, the debtor will also be able to remortgage their house. If this is possible, it can be a good way to end the IVA early. If you have a tenancy agreement with your landlord, you might need to look into it carefully. If your rent payments have been up to date, your landlord may not want to end your tenancy.
Because an IVA affects your credit history, you may have trouble finding a lender who is willing to give you a loan with a high interest rate. In such a case, it is advisable to seek advice from a specialist lending adviser or broker. The sooner you pay off your secured loan, the better, as it will free you from restrictions on your credit rating. Once you’ve settled the secured loan, you can begin paying off other loans.
If you have multiple types of debt, including unsecured loans and multiple creditors, an IVA may be the best way to go. However, if your debt is too large to fit into an IVA, you should consider a secured loan instead. You could sell your home as collateral for the money you owe, which can help you pay off your debt. If you are unable to sell your home to cover your debts, you can also use the proceeds from the sale of your home.