Is an IVA worth it? The IVA advantages and disadvantages

A review of the positive and negative aspects of entering into an IVA to help you make a decision about whether this debt solution is right for you.

Things you should consider before entering into an individual voluntary arrangement.

As a company who aims to be ethical and honest with our debt advice, we want to make sure you’re clear on all the positive and negative aspects to the debt solutions we offer. Here are the advantages and disadvanatges of an individual voluntary arrangement, also known as an IVA:

IVA Advantages

  1. You could become debt free within 5 years, or even less if your circumstances allow for a lump sum IVA.
  2. An IVA can help you avoid bankruptcy proceedings. View our comparison of debt solutions table to see in more detail why an IVA could be a better option for you.
  3. Once your IVA is in place, no more interest can be added by your creditors.
  4. Instead of making individual payments each month to different creditors, you will only have to make one fixed affordable monthly payment which will be distributed to your creditors.
  5. Providing you meet your monthly IVA payment, creditors cannot take further legal action against you.

IVA Disadvantages

  1. Entering into an IVA will have a negative effect on your credit rating throughout the duration of your IVA and for an extra year after completion. It’s worth remembering that if you’re in debt an are struggling to meet your repayments then your credit rating may already be adversely affected anyway.
  2. If your IVA fails, this can result in your creditors petitioning for your bankruptcy.
  3. Although an IVA can allow you to keep your home, if you have equity in your property you will usually need to remortgage at some point during the IVA to repay some of your debt. This normally happens during the final year of the IVA.
  4. You may have to sell any high value assets you own, or downsize. For example you may have to exchange a luxury car for a more reasonable vehicle.
  5. Any additional income you earn, such as a one-off bonus, will be taken into account and you could be expected to pay a large proportion of this into your IVA, although you will never have to pay more than you owe.

If you think an IVA could help you with your debt problems, take our online debt analyser now to find out more about what’s right for your individual finances.

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