Could I Get a Loan or Remortgage Instead of Entering an IVA?
If you are struggling with an unmanageable level of debt that you can’t afford to repay, one option that could help you is an IVA (Individual Voluntary Arrangement).
An IVA is a legally binding debt solution. It’s an agreement with your unsecured lenders, in which you will be required to repay as much of your unsecured debt as you can realistically afford to over – in most cases – five years, after which any remaining debt will be written off.
However, an IVA is a serious financial commitment, and does have its drawbacks – so it’s important that you consider the alternatives before you commit to anything.
When would an IVA be suitable?
An IVA may be suitable for you if you have no realistic way of repaying the money you owe within a reasonable amount of time, but you can commit to making reduced monthly payments for five years.
Your unsecured creditors will only accept an IVA if they believe that you are unable to repay your debt in full, and that it’s the most realistic way for them to get as much of their money back as possible.
Entering an IVA will have an impact on your credit report for six years from the time the agreement starts – which will affect the cost and/or availability of credit for this time.
Would a loan or remortgage be more appropriate?
If you are worried about the effects an IVA could have on your credit rating – or any other aspect of entering an IVA – you may be considering alternative ways of tackling your debts.
Some borrowers successfully use a debt consolidation loan or remortgage to make their debts easier to manage. However, if your debts are so serious that you have been considering an IVA, a debt consolidation loan or remortgage is unlikely to be suitable for you.
There are two main reasons why this may be:
1. Taking out a new loan/remortgaging involves taking on more debt, which may prove difficult considering your circumstances.
2. Although a debt consolidation loan or remortgage can lower your monthly expenditure, the actual difference probably won’t be significant enough to help you regain control of your finances if they’re really out of control.
Please note that there may be other, more suitable alternatives to your debt problem – such as a debt management plan or even bankruptcy. A professional debt adviser should be able to help you identify the most suitable solution to your debts.
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