If you have a secured loan and you’re in financial trouble, you may be interested in considering an IVA. This is a type of voluntary arrangement that allows you to repay a part of your debt over a longer period of time. In most cases, your creditors will need to agree to the plan. Once the proposal is approved by 75% of your creditors, it will be finalised. However, you should expect that your creditors will haggle over the terms. They may demand that you borrow more money, include assets in the plan, or simply ask for a longer repayment period.
An IVA is different from a bankruptcy, and the amount you need to settle your debts will vary from person to person. It will depend on the remaining balance and whether you have equity in your home. However, you should aim to get an offer that is close to the full amount of your debt. You must also ensure that the early settlement you request doesn’t disadvantage your creditors.
The first step in an IVA is to determine your level of equity in your home. You must have at least PS5,000 of equity in your property before you can begin the process. You will also need to decide if you’re likely to remortgage or obtain a secured loan. An IVA proposal will typically include payments over a six-year period. Once you’ve completed the plan, your home will be revalued to see if your payments are affordable.
Another type of debt that can be included in an IVA is a County Court judgment. You will need to consider whether you want to include this type of debt in your IVA, but it’s not recommended if you owe a large sum of money to more than one creditor. You should seek advice from a debt adviser to find out if you qualify for an IVA.
In an IVA, your creditors have to approve a repayment plan. While it’s important to research the advisers before committing to an IVA, you should be aware of the possible consequences of defaulting on payments. A bad credit score can prevent you from accessing credit again, and failing to make repayments may result in home foreclosure and bankruptcy.
If you choose an IVA, you should know that your lender will list your debt as a third-party debt. Your lender will be hesitant to give you a loan with an IVA on your file. The IVA will have a negative impact on your credit score, so you should make sure to repay your loan on time to protect your credit score.
As with any debt management option, an IVA is a last resort and not a first choice for the average person. If you have stable income and need help managing your debt, an IVA may be worth considering. However, if you are struggling to find reliable employment or if systemic problems are the cause, an IVA might not be right for you.