Wondering about loans for people with IVA? Worry no more. It’s not surprising that after or before getting an IVA, you may have certain questions about your ability to get credit in the future.
In this article, we will cover everything you need to know about getting loans during an IVA. So stay with us and read till the end.
Table of Contents
What Exactly is an IVA (Individual Voluntary Agreement)?
An IVA is a formal agreement made between you and your creditors to repay your debts over a set period. After receiving an IVA, the debtor should make payments every month. Thereafter, the monthly instalment is split among the creditors.
The IVA period lasts for around five to six years. Afterwards, any debt that’s remaining is written off. If you want to get an IVA, you should request a licensed Insolvency practitioner (IP) to set it up for you. This IP agent collects payment from you and splits it within your creditors after cutting a small fee for them selves.
We strongly recommend you to use an Insolvency practitioner (IP) who has been authorised by the Insolvency Practitioners Association to be on the safe side of not getting scammed. We have already created a dedicated article to give you a full Guide to the debt solution IVA. Feel free to check it out as well.
Am I Eligible for an IVA?
To be eligible for an IVA, you first need to prove that every month you have a disposable income. If this amount is less than £100, you won’t be eligible. This is because your creditors will not accept an amount less than £100 in the agreement.
- Requesting to pay in a lump sum might help you to get an IVA.
- This is also a good option if you have some high-value items.
- In a case where you have a benefit-only income, getting an IVA will be tough.
You need to owe thousands of pounds (at least £5,000) to multiple creditors (more than 1) to be able to receive an IVA. Therefore, you can check out alternative debt solutions if you don’t meet these criteria.
How Does an IVA Affect Your Life
Having an IVA can make getting loans a challenge. Think payday loans for IVA customers – they might seem tempting, but are they the best option? Life with an IVA means managing your finances with great care. This means you cannot get loans or spend your money on things other than your essentials.
Spending on luxury items is also not allowed.
What are the Pros and Cons of an IVA?
Identifying the benefits and disadvantages of an IVA is crucial. After all, you may be considering loans for people with IVA as a way out. So, let’s break it down.
Loans For People with IVA – How Does an IVA Impact Your Credit Rating?
Your IVA stays on record for six years. So, getting loans for people with IVA is tough. Furthermore, an IVA damages your credit score right after you get the approval. And after this, you might find it hard to get credit. It is because your credit score plays an important role in receiving credit.
But the IVA will be there on your credit report for no more than six years. Since an IVA usually lasts only for five years, it will be there on your credit report for six years. That means it will be visible in your credit report for one more year after you complete the IVA. But after passing six years after receiving an IVA, your credit report will improve.
One of the best ways you can improve your credit score is to manage your finances well by paying off any debts or bills without any delay.
Loans for people with IVA – Can You Get Credit While in an IVA?
So you’re in an IVA and wondering, “Can I still get credit?” It’s a burning question for many. You’re in luck, as we’re about to unveil the truth. Buckle up!
- In most IVAs, you can apply for credit up to a maximum of £500.
- You need to get permission from the Insolvency Practioner (IP) in order to take new credit of more than £500.
- Seeking Permission- If you aim to borrow more than £500, you’ll likely need approval from your Insolvency Practitioner
- Reasons for Denial- Your IP might consider your current financial stability and debt repayment plan.
- Payday loans for IVA customers often come with high interest rates and should be avoided.
- Getting a credit card while in an IVA is generally not recommended.
- The £500 Limit – Loans for people with IVA usually have a £500 cap without needing IP approval.
- Beyond the Limit – Loans for IVA customers, direct lender options might exist. But they come with their own pitfalls, like High Interest.
Loans for People with IVA: Can I Get a Credit Card with an IVA?
Getting a credit card during an IVA can be challenging. Lenders might see you as high-risk, given your financial history. But this does not mean you have zero chance of getting one. You will just face some complications because of your credit score.
But it’s important that you ask yourself if you actually need a credit card because, generally, it is not recommended. In a situation where you are facing unpredicted issues, you should let your IVA supervisor know. They might consider a few things and even decide to adjust your payment amounts to match your current financial situation.
Can You Pass a Credit Check with an IVA?
While on an IVA, passing a credit check becomes difficult. Whether it’s car finance or payday loans for IVA customers, lenders might be hesitant.
Different lenders have different benchmarks that they use to assess credit scores and to identify if it’s safe to hand over credit to a particular person. So, if you don’t get approval for credit from one lender, this doesn’t mean every lender will reject your request for credit.
There are some lenders that actually willingly offer credit to people with low credit scores. But most of the time, they offer it with large rates of interest. So in a situation where you pass a credit check, picking a bad credit lender is the better way to go about it.
But always consider this well before you take more credit since you’re already struggling with debt. Overall, loans for people with IVA are tough, as passing a credit check won’t be easy anymore.
Most likely, you will not be able to secure a guarantor Loan during an IVA on progress.
Comparable to the regulations governing loans, borrowing more than £500 from relatives or close acquaintances during an IVA is prohibited. This restriction is in place to ensure equitable treatment of creditors and prevent any perceived favouritism towards repaying loved ones rather than to your creditors.
What Car Finance Options Are Available to Me during My IVA?
Getting loans for people with IVA, especially for car finance, is tricky but not impossible. Rates might be higher, but some lenders cater to people with poor credit histories. Research and patience are crucial.
You need to get permission from your Insolvency Practitioner in order to get Car Finance while an IVA is in progress. You will most likely get approval to get car finance from your IP, especially if the car is a necessity for you to remain employed.
Many car finance companies accept people with IVAs. But for this, they will first make sure you have permission from your IVA provider.
Are loans for people with IVA allowed?
Loans for people with IVA are allowed but with caution. Where can I get a loan with an IVA on my record, you ask? There are lenders, but be ready for higher interest rates. It’s essential to rebuild your credit score first.
You can get a loan of £500 or less without permission from your IP. But make sure to first confirm with your Insolvency practitioner if this is allowed and get permission if they ask you to. But keep in mind that if you’re required to ask permission from your IP, getting permission might be a tough task.
Furthermore, if you get approval from your IP, the loans you manage to receive will have high-interest rates. So this means you will have to pay back more than you took.
Similar to this, you also cannot borrow any money from your friends or family if it’s more than £500 while on an IVA. One of the main reasons for this is that you will have to pay your friends and family back, but you might show preferential treatment when repaying loved ones over creditors.
Only a limited number of lenders are open to providing credit to individuals who are still in the process of repaying an IVA. Some specialised lenders, commonly referred to as bad credit lenders, cater to individuals with poor credit histories. Surely, they will lend you money with high interests in progress.
The feasibility of enrolling in a salary reduction scheme during an IVA depends on the evaluation carried out by your IVA provider.
For instance, you might opt to reduce a portion of your salary to purchase a seasonal transportation pass for commuting to work, thereby saving more money than the amount of your monthly salary reduction. If this results in a clear financial benefit, it is likely to be approved.
An IVA remains on your credit report for a duration of six years from the date of its approval. After this period, the IVA record is automatically removed from your credit report, requiring no further action on your part.
There exist numerous methods for improving your credit score post-IVA. However, the most straightforward approach is effective management of your personal finances. Timely payment of bills and any existing debts is essential.
Improving your score doesn’t necessarily mandate taking out additional credit and repaying it promptly.
You can submit a loan application for any amount after completing an IVA without requiring permission from your IVA supervisor.
Nevertheless, securing a loan post-IVA can still be challenging. Removal of the IVA from your credit file does not automatically guarantee an acceptable credit score for lenders.
In theory, you can seek a loan immediately after the conclusion of your IVA. However, due to your recent credit history, it can become difficult. Any loans approved during this period are likely to carry high-interest rates.
It can be advantageous to postpone seeking credit until you have improved your credit score, a process that may take several months to over a year.
Loans for people with IVA – Can I Get a Mortgage after an IVA?
Yes, It is Possible. But first, you need to improve your credit score.
Improving the credit score before you apply for one is very important at this point. It is because, with a better credit score, your chances of getting a mortgage are high. You might be able to land a deal that is much more convenient for you with a lower interest rate.
But keep in mind that you cannot get a mortgage while you’re on an IVA. You can only get one after you complete your IVA. According to the conditions of an IVA, you should use your disposable income to pay off the amount you owe. So, paying off a mortgage with your disposable income is not an option.
This is why you should first wait till you complete the IVA before you apply for a mortgage. It is much healthier for you and your credit file.
Here, the remortgaging will not be the same as before.
- You may have to remortgage your house to pay off your debts.
- Your Insolvency Practitioner can value your house and see if this is a viable option.
Does IVA debt consolidation exist as a concept?
In a sense, An IVA is a form of debt consolidation. However, it’s possible to enhance this consolidation by utilising an early settlement loan specifically designed for IVAs.
What is an IVA early settlement loan?
An IVA early settlement loan is a specialised loan designed for individuals who have progressed well beyond the halfway point of their Individual Voluntary Arrangement
(IVA). This type of loan provides them with sufficient funds to settle their IVA prematurely and effectively while replacing their ongoing IVA payments with loan repayments.
Yes, repaying the IVA early settlement loan may entail higher costs compared to continuing with the IVA normal payments. But it liberates the debtor from the conditions and restrictions associated with the IVA in return. And that’s a plus point.
It’s important to note that an IVA also offers more flexibility to adjust payments in the event of a decrease in income. However, this feature is not available with an IVA early settlement loan.
Before considering this option, it is advisable to thoroughly evaluate whether the early settlement loan is financially viable and beneficial. Seeking debt advice from a charitable organisation may be a prudent step to take.
Are There Alternatives to an IVA?
In addition to choosing an IVA, Yes, there are a number of other debt solutions available in the UK that you can use to solve your debt issue. Some of them are as follows.
- Debt Management Plans (DMPs) – A Debt Management Plan consolidates all your debts into a single monthly payment. Pros and cons of a DMP include:
- Pros: No setup fees and more flexibility.
- Cons: Not legally binding, and creditors can still chase you.
- Bankruptcy– Declaring bankruptcy wipes your debts, but it also wipes your assets. Some pros and cons of bankruptcy include:
- Pros: Quick debt relief.
- Cons: Severe impact on credit rating, loss of assets.
- Debt Relief Order (DRO) – A DRO is like a mini-bankruptcy. Some pros and cons include:
- Pros: Low-cost setup, suitable for smaller debts.
- Cons: Strict eligibility criteria affect credit rating.
- Credit Counselling- Professional financial guidance to help you manage your debts.
Sounds simple, but is it effective? We’re about to spill the beans! Some pros and cons of credit counselling include:
- Pros: No drastic measures, improvement in financial habits.
- Cons: Takes time and may incur fees.
All these options have their own sets of pros and cons. Like an IVA, each can either open doors or limit your access to future financial opportunities like loans with an IVA. The decision is as tricky as it gets, and we’ll delve more into that in our next discussion!
Can I Get Scammed with an IVA?
Beware! Not every offer is genuine. If something seems too good, it might not be for real. Always do thorough research, especially when looking for loans for people with IVA. This is because some companies use your situation to take advantage by offering scam services.
Knowing how these scams work is the best way to avoid them. Some points to look out for include:
- Pressuring to sign an agreement- a proper IVA company will give you enough time for you to carefully read the agreement before you sign it. But if they are pressuring you to sign the agreement, that is a huge red flag.
- High fees- even though a normal IVA has a certain amount of fees, you should only pay it in your monthly payment. But if an IVA company is asking you for fees upfront, then be careful, as it might be a scam.
- Unsolicited offers- always stay aware of any IVA company that reaches out to you suggesting that you take an IVA. Normally, you’re the one who should reach out to an IVA company. But if it’s happening the other way around, then something’s not right. /span>
Who Can Help on Loans For People with IVA?
If you want additional advice or guidance on this, you can reach out to the following:
- Citizens Advice
- National debt line
- Debt Advice Foundation
They offer free advice for anyone struggling with debt. So, if in doubt about loans for IVA customers, direct lender options, or other issues, seek help!
- Most IVAs allow you to apply for credit up to £500. But exceeding this limit generally isn’t allowed.
- For loans that exceed £500, you’ll likely need to get approval from your Insolvency Practitioner.
- High-interest options like payday loans for IVA customers should be avoided. Credit cards are generally not recommended./span>
- Loans for people with an IVA usually cap at £500 without needing approval from the Insolvency Practitioner.
- Some direct lenders might offer loans for IVA customers. However, keep in mind these loans come with their own set of challenges and risks.
- The possibilities for loans for people with an IVA are not black and white. You always need to seek advice and permission from your IP.