Is an IVA Worth it?

If you’ve been searching for debt solutions in the UK, there’s a good chance you will have come across Individual Voluntary Arrangements (IVAs). There’s a wealth of information about this particular debt solution, and we answer many questions every day from our clients who are in similar situations.

One frequent question we hear is, “is an IVA worth it?”

Although this is frequently asked, deciding whether an IVA is worth it for you depends entirely on your specific financial situation. However, here are some factors to consider if you are wondering whether or not an IVA is worth it for you:

Your Monthly Affordability

IVAs consist of one monthly payment that you make which contributes towards your debts. You would need to consider whether you can realistically keep up payments for this after all your essential costs have been taken care of each month.

If you’re unsure where to start with this, Money Advice can help carry out a financial assessment which would help determine your affordability – we can discuss what is or isn’t realistic for you before any proposals are made. Our IVA Calculator may help give an initial indication of what these payments may look like for you.

Legal Protection

One of the main advantages of an IVA is that it provides legal protection from your creditors. Once the IVA is approved, your creditors cannot take legal action against you or pursue additional interest charges or fees. This protection also brings peace of mind and can help you manage the process more effectively.

What’s Your Debt Level?

IVAs are suitable for individuals with unsecured debts, such as credit card debt, personal loans, or overdrafts. If your debt level is relatively low (below £10,000), alternative options may be more appropriate – such as informal debt management plans.

IVA Repayment Terms

In addition to your monthly repayment figure, it’s also important to consider the length of the agreement, as IVAs typically last around five to six years. You’ll therefore need to evaluate whether you’re comfortable with the length of this agreement and that you can maintain repayments for the duration.

Regulated and Professional Assistance

IVAs are managed by licensed Insolvency Practitioners who negotiate with creditors on your behalf, as well as handling the administration of your IVA. This includes collecting and distributing payments. Your IP will be the middle-man who you will have for any support or guidance that you need whilst undergoing the IVA.

At Money Advice, we work with reputable and experienced Insolvency Practitioners who ensure your interests and your finances are protected.

Credit Impact

It’s important to be aware that entering into an IVA will have a negative impact on your credit rating. This will make it more challenging to obtain credit during the IVA term and for some time afterwards. However, if you’re struggling with debt, your credit score may already be affected, and an IVA can provide a structured path to becoming debt-free.

Are There Other UK Debt Solutions?

Alternative Solutions: Before committing to an IVA, explore other UK debt solutions such as Debt Management Plans (DMPs), Debt Relief Orders, or Bankruptcy. Each option has different implications, and it’s essential to understand all the alternatives before making a decision.

Ultimately, whether or not an IVA is worth it depends on your individual circumstances – the level of debt you have, your ability to make regular payments, and what you want to get out of a debt solution. It’s important to weigh up IVA pros and cons, and it’s advisable to also seek professional financial help before committing to any solution (whether they’re formal or informal).

If you’re considering an IVA or any other solution, Money Advice can help get the ball rolling with a free, no-obligation financial assessment. Why not talk to us today?