Is an IVA worth it and right for me?
If you’ve been researching debt solutions, you may well have come across information on individual voluntary arrangements (IVAs). There’s a lot to consider when weighing up whether an IVA is right for you. People often ask ‘is an IVA worth it’?
In this guide, we’ll try to answer that question for you by considering:
- when an IVA might be a suitable option
- the benefits of an IVA and the things you need to bear in mind
- alternatives to an IVA
What's in this guide?
Is an IVA worth it?Is it a good idea to take out an IVA?Check if an IVA is right for youGet debt adviceComparing an IVA against other debt solutionsIs an IVA worth it?
Whether an IVA is worth it for you will depend entirely on your personal situation and what you’re hoping to achieve from a debt solution.
Things that you’ll need to consider include:
- Where do you live?
- Will it affect your living situation?
- Will it affect your job?
- How many lenders do you owe money to?
- How much money do you have left over each month after paying your essential living costs
- How much would you value having legal protection from your lenders?
- Do you want to have some of your debt written off
Is it a good idea to take out an IVA?
It might be a good idea for you to take out an IVA if:
You can’t afford to pay your debts
An IVA is a type of insolvency. You should only take out an insolvency solution if you can’t realistically afford to pay your debts.
You owe money to multiple lenders
If you owe money to multiple lenders and they’re all demanding payment, an IVA may be a good way to make sure everyone is treated fairly. With a regular payment IVA, you’ll make one monthly payment and this will be divided between your lenders based on how much you owe each one.
You want to write off some of your debt
If you’re not going to be able to pay off what you owe in a reasonable amount of time, an IVA may be a suitable option. With most IVAs, you make payments for five or six years. After that time, any remaining debt included in your IVA is written off. On average, the IVA customers who come through us have about 70% of their total unsecured debt written off but it can be as much as 85%.
You want to protect your home
If you’re a homeowner, you won’t be forced to sell your home if you take out an IVA. But you may need to remortgage to raise money to go towards your debts. If you’re unable to remortgage, you may need to carry on making your IVA payments for up to an extra 12 months. Learn more in our guide on IVAs and mortgages.
If you’re renting, an IVA won’t usually affect your living situation. But some private landlords include a condition in their tenancy agreements that mean you could be asked to leave if you take out any form of insolvency solution. You should check this first.
You want to prevent your lenders taking further legal action
Once an IVA is approved, lenders can’t take legal action against you or add any extra interest or charges to your debts. This may provide valuable peace of mind if this is a concern for you.
You’re able to make the monthly repayments
Most IVAs involve making monthly payments for five or six years. The amount you’ll pay each month will be based on how much disposable income you have after covering all your essential costs. This amount will be reviewed throughout your IVA but you’ll need to have a steady source of income to make sure you can keep up with your payments.
As well as making payments towards your debts, you’ll also be charged fees for an IVA. These very between companies. If you get an IVA from our sister company, there are no up-front fees. All your fees will be paid out of – not on top of – your regular, affordable IVA payments. Read more about individual voluntary arrangement fees.
It won’t affect your job
For most people, an IVA won’t affect their job. But it may prove problematic in certain professions. If you’re a solicitor or an accountant, for example, you might not be able to carry on in your current position with an IVA. Or you may only be allowed to keep your job subject to certain conditions. You should check if there will be any repercussions before applying for an IVA.
You’re aware of the effect on your credit rating
An IVA will remain on your credit file for six years from the date it’s agreed. You’ll probably struggle to borrow from mainstream lenders during this time.
Check if an IVA is right for you
There aren’t back and white rules about who can get an IVA. We’ll take into account lots of factors before deciding whether an IVA is suitable for you.
There are certain things you can check to see if it’s likely to be a viable option though.
Check 1: Where do you live?
IVAs are available in England, Wales and Northern Ireland.
Check 2: How much do you owe?
You generally need to have non-priority debts (credit cards, buy-now pay-later, personal loans, overdrafts etc.) of at least £5,000.
Check 3: How many lenders do you owe money to?
You’ll need to owe money to more than one creditor.
Check 4: How much disposable income do you have?
If you’re looking for a regular payment IVA, you’re probably going to need to be able to make monthly payments of at least £75. This means you’ll need to have at least this amount left over each month after covering all your essential living costs. You’ll also need to have a regular source of income to make sure you can keep up with the payments for as long as the IVA lasts.
Get debt advice
If you’re considering an IVA, get debt advice. A professional debt adviser will make sure they understand the ins and outs of your situation and run through any suitable debt solutions and how they’re likely to affect your life. This will help you choose the one that’s right for you.