A secured loan is a type of debt solution agreement in which the borrower takes a loan against the equity in their property. This loan is deducted from the debt accumulated during the IVA. This arrangement is usually implemented toward the end of the IVA. The borrower will be informed of the terms of the secured loan about six months before the IVA ends. The borrower will have time to repay the secured loan before it is due.
Most short term loans have very high interest rates. Short-term loans include everything from credit cards and bank overdrafts to furniture and electrical goods. These types of debts are often associated with personal guarantees, such as by the director of a limited company. A family member can also sign personal guarantees.
An IVA is a legal debt solution that allows a borrower to make smaller monthly payments on their current debt. They can also have a lump-sum payment to cover one or more of their debts. However, the monthly payments must be affordable for the borrower. A qualified Insolvency Practitioner will help the borrower to make a repayment plan that works for both the debtor and the creditors.
Before an IVA can be finalised, the creditors must agree to it. This often happens in the form of a vote sent to the IP. The IVA will be approved only if 75% of the creditors vote in favor. This means that the creditors who owe you the most will often vote against it. The remaining creditors will then haggle over the terms of the proposal. They may want to borrow more money, or include their assets in the plan, or even ask for a longer repayment period.
Getting an IVA is not always easy, so the advice of an IP is invaluable. It is vital to carefully research an advisor before accepting one. It is important to remember that a bad credit score will make it difficult to access loans and credit options. If you fail to make repayments on time, you could find yourself in a situation where you can no longer pay your debts. This could put your home at risk and you may even become bankrupt.
Choosing the right lender is an important step when obtaining an IVA. Not all lenders will accept applicants with an IVA, so it is essential to know who to choose before making the decision. A specialised lender will be able to get you a loan even if you have a bad credit rating.
As well as being able to reduce your monthly payments, an IVA will protect your essential assets from unsecured creditors. Unlike a bankruptcy, an IVA allows you to keep your home. Bankruptcy will leave ownership of your property to an official receiver, requiring you to release the equity in order to pay back your creditors.