Keep in mind you will be bound by certain rules and laws when taking new Loans with an IVA already in progress.
IVA stands for Individual Voluntary Arrangement. It is a formal agreement arranged between you and your original creditors that allows you to pay back a portion of your debt via a payment plan over a maximum of six years.
- It is a formal arrangement supervised by a licensed Insolvency Practitioner (IP).
- It typically involves a single monthly payment over a fixed period of 6 years maximum.
- Plus, a portion of the debt may be written off when the IVA concludes.
IVAs provide a structured way for individuals to avoid bankruptcy while addressing their debt problems.
While you’re chipping away at that debt with monthly IVA payments, you might start wondering about taking out more credit, like loans. It’s more complicated than you think. So, Let us guide you through to learn more about getting loans while having an IVA in progress…
Table of Contents
What is Credit?
Credit is essentially an arrangement where you borrow money or obtain goods and services with the agreement to pay it back later.
The lenders or various companies offer credit based on their trust in your ability to repay the total credit amount, including extra charges like interest and taxes.
In the UK, Your creditworthiness is measured through a three-digit credit score system. It is also known as credit rating. And, this score influences your creditors’ and lenders’ confidence in you to grant more credit or not.
The higher the credit score you have, the higher your chances of getting new credit. You will be able to secure loans like personal loans if the credit score is higher enough.
Now, you might be wondering how to monitor your credit score and Credit rating report.
For that, you can use authorised credit reference agencies like Experian, TransUnion, or Equifax. These credit reference agencies are authorised and monitored by the Financial Conduct Authority. Thus, you don’t need to worry about their legitimacy.
Can I Get Credit, Like a Loan, While in an IVA?
You have to commit to repaying your debts through manageable monthly payments if you get the approval for an Individual Voluntary Arrangement (IVA). It’s essential to understand that this commitment may restrict your ability to access additional funds during the duration of the arrangement.
This restriction applies to various forms of borrowing, including:
It’s crucial to note that you are generally not allowed to borrow more than £500 from a lender when you enter an IVA. And, you need to obtain written consent from your Insolvency Practitioner (IP) if you need more than that, then.
Exceeding the £500 limit without obtaining prior permission would result in a breach of the terms of your IVA. It could potentially jeopardise the success of your arrangement.
You need a strong case to successfully get your IP’s permission. Think of something urgent like medical emergencies or home repairs. Below are some good and bad reasons that could arise inside your head due to various circumstances in life.
- Medical emergency
- Home repairs
- Educational expenses
- Going on a holiday
- Buying non-essential items
Keep in mind, Even with your IP’s approval, loans for IVA customers come with their own set of risks. Higher interest rates often tag along with loans for people with an IVA. It’s because lenders consider you a high-risk borrower compared to a normal borrower with a normal credit score.
How Do I Get Further Loans with an IVA in progress?
It is crucial to first consult your Insolvency Practitioner (IP) before approaching a lender if you’re considering obtaining additional credit while in an IVA. Your IP will make the decision regarding your eligibility for accessing new credit based on the following factors:
As previously mentioned, failing to inform your IP about any new loan may result in a violation of your IVA terms and put the entire arrangement at risk. As a result, you could even lose the IVA, worsening your debt issue.
So be prepared to face the consequences if you’re considering obtaining additional credit without notifying your IP.
It’s also worth noting that even if your IP approves your request for borrowing, you might encounter difficulties in finding a willing lender. This is due to the fact that IVA details are publicly accessible and can be found on both the Insolvency Register and your credit report.
Potential creditors rely on credit reference agencies to examine your financial history and assess your capacity to meet your financial debts. If you have a poor credit score, you might face loan rejection or be offered a loan with a higher interest rate.
Always exercise caution when considering a loan with a high-interest rate, as it could lead to an uncontrollable increase in your current repayment commitments.
Hearing about your poor credit score might have made your heart sink, but don’t lose hope yet. There are specialist lenders who focus on providing small loans for IVA customers.
But beware, not all lenders are created equal. Some might try to exploit your situation with astronomical interest rates. And that’s the last thing you need, right?
- Check their interest rates
- Read customer reviews
- Look for hidden fees
Getting loans for people with IVA involves a different process than standard loans. Expect stricter vetting and more paperwork. You might be wondering what you should have on hand to make the process smoother. You definitely want to read the next section to find out.
- Proof of income
- Recent bank statements
- ID and address proof
If you’re worried about approval, consider bringing in a guarantor. A guarantor can drastically improve your chances. However, Keep in mind this could put your guarantor at financial risk if you fail to come up with payments on time. Therefore, think twice and be sure of settling the debt on time.
Pros and Cons of Borrowing Money During an IVA
Before you jump into action, let’s sum up the pros and cons.
- Helps in emergencies
- You can make essential purchases
- High-interest rates
- Requires IP’s approval
- Can put your IVA at risk
Loans with an IVA certainly come with their challenges, but it’s not an impossible task. However, are the risks and the high interest worth it? Your next decision could very well change your financial future. Stick around to uncover more secrets to navigating an IVA.
Can I Borrow Loans from Relatives with an IVA in progress?
It might be alluring to seek financial assistance from friends and family while undergoing your IVA. On the other hand, keep in mind it’s imperative to recognise that such actions directly go against the terms of your IVA agreement.
And yes, thinking of borrowing funds from those closest to you may appear as a more cost-effective and convenient alternative compared to taking out a loan from a mainstream lender. However, this decision could jeopardise the integrity of your IVA.
Also, you could potentially worsen your financial situation if you prioritise repaying friends and family ahead of the creditors listed in your Individual Voluntary Arrangement (IVA).
We strongly advise you to promptly reach out to your IVA provider if you have concerns about covering unforeseen expenses or if you are already facing difficulties with your monthly IVA payments.
What is an IVA Early Settlement Loan?
Many individuals express an interest in settling their IVA ahead of schedule through a lump sum payment. But the truth is that only a small number of people are actually in a position to make such an offer.
You can decide whether to obtain a loan to cover the remaining debt if your financial circumstances do not allow for an early IVA settlement.
There are certain companies, such as Sprout Loans, that specialise in providing IVA early settlement loans, although securing additional loans can be challenging.
However, It’s important to exercise caution when considering this type of loan. It’s because IVA early settlement loans may shorten the duration of your arrangement. But they often carry high-interest rates.
Consequently, these loans can lead to increased financial strain rather than offering assistance for some individuals. Therefore, it is crucial to thoroughly research your options and obtain approval from your Insolvency Practitioner (IP) before proceeding with a loan application.
Additionally, it’s worth noting that you need to fulfil certain conditions before becoming eligible to apply for an early settlement loan.
The eligibility criteria includes:
- Completed at least half of your IVA term
- All IVA payments must be up to date
- Sufficient income to afford loan repayments
Every rose has its thorns, and so does when taking early settlement loans with an IVA in progress. Below are some general pros and cons you could experience if you get accepted for an IVA Early Settlement Loan.
- End your IVA early
- Potentially improve credit score sooner
- No more monthly IVA payments
- High-interest rates
- Additional loan to repay
- Possible extra fees
Can an IVA Affect My Credit Score?
Yes, an IVA can indeed influence your credit score. The presence of your IVA information will be retained on your credit file for a duration of six years, commencing from its initiation.
In the case of a standard 60-month (5 years) IVA, it typically disappears from your credit file approximately one year after you have made your final payment towards it.
You will be issued a completion certificate upon successfully concluding your IVA. This certificate serves as tangible evidence that you have diligently adhered to the terms and conditions of the arrangement.
It is highly advisable to share this certificate with credit reference agencies and any prospective lenders. Doing so enables you to start on the journey of rebuilding your credit score.
Reestablishing your creditworthiness is essential for future financial endeavours and securing more favourable lending terms.
Can I Get Loans After an IVA?
Think of your credit score as your financial CV. Since an IVA can have adverse effects on your credit score, obtaining credit even after its completion can prove to be challenging.
Ideally, it’s advisable to wait until the IVA has been completely removed from your credit file before applying for any form of new loans. This includes avoiding taking both secured and unsecured debts as well.
However, it may be beneficial to consult with a local credit union rather than approaching mainstream lenders if waiting is not an option and you require access to new credit sooner rather than later.
Furthermore, it’s crucial to take proactive measures to rebuild your credit score after your IVA concludes. One effective way to achieve this is by consistently making on-time payments for all your monthly financial obligations, including bills and other commitments.
Also, it’s better to consider obtaining a credit-building card as a means to improve your credit standing. But it depends on your current financial situation and the feasibility of repayments within your new proposed budget post-IVA.
Where Can I Find Out More About Borrowing Money to Manage Debt or an IVA?
For those hungering for more, remember that financial advisors and debt counsellors can provide personalised advice that suits your unique situation. Sometimes, the smartest step is to consult a pro for the best advice on managing debt and IVAs.
Need More help getting loans with an IVA in progress? Or do you want to know about other debt solutions at your disposal?
Ready to take control of your financial future and explore debt solutions like IVA? Our dedicated “Money Advisor” team is here to guide you every step of the way. Take the first step towards financial freedom by clicking here and filling out our simple form to receive personalised debt advice today.
Do you want to know about other debt solutions at your disposal?
In the world of debt management, there are various paths to explore, each with its own unique advantages and considerations.
We’ve compiled comprehensive articles on a range of debt solutions available in the UK to help you make an informed decision tailored to your financial situation. Click on ‘Debt solutions’ to delve into these detailed guides and discover the best path toward your financial peace of mind.
- Understanding Individual Voluntary Arrangement (IVA). An IVA is a formal agreement between a debtor and creditors. It permits the repayment of a percentage of debt over up to six years.
- The Impact of IVA on Further Credit. Monthly IVA payments are a commitment to repaying the owed amount. These payments can affect the ability to borrow additional money during the agreement period.
- Exploring “Loans with an IVA”. Despite being in an IVA, borrowing up to £500 without your Insolvency Practitioner’s approval is possible. Borrowing amounts larger than £500 requires written approval from your Insolvency Practitioner.
- The Challenge of Credit Score during an IVA. IVAs can impact credit scores negatively, making it challenging to borrow from traditional lenders. Specialist lenders offer “loans for people with IVA”, but they may come with higher interest rates.
- The Concept of IVA Early Settlement Loan. An opportunity to exit your IVA earlier than the agreed-upon time. These loans can have high-interest rates. To be eligible, half of the IVA term should be completed with all payments up-to-date.
- Crucial Points to Remember. Always seek advice and understand the terms before borrowing during an IVA. Stay updated with your IVA commitments to have better borrowing options in the future.
Yes, it’s possible to get a loan with an IVA, but it can be challenging, and approval is not guaranteed.
Yes, an IVA can impact your eligibility, making it harder to secure loans. Lenders may offer loans with higher interest rates.
Risks include higher interest rates, potential default, and potential extension of your financial struggles.
Consider it carefully; it’s best when necessary and when you can manage repayments without jeopardising your IVA.
Yes, some IVA early settlement loans are available, but they often come with high interest rates.
Yes, some IVA early settlement loans are available, but they often come with high interest rates.
Typically, you should be at least halfway through your IVA and current on payments.
Timely payments on loans and other financial commitments, along with responsible financial management, can help improve your credit score.
Some companies, like Sprout Loans, specialise in offering loans to individuals with IVAs.