Pros and Cons of an IVA

Although you may be keen to jump straight into sorting out an IVA, you should carefully consider the following pros and cons before you make any decision. Although it can provide a fantastic means of getting rid of your debts, there are always some downsides that will need to be weighed up.

Pros

One of the main reasons for taking out an IVA is that you will usually end up paying less back to your creditors overall, depending on your financial situation. As well as making lower monthly payments, after the IVA comes to an end any remaining debt will be written off.

IVAs provide a fixed timetable for repayments, meaning you will know that at the end of five years you will be debt free. This provides peace of mind and the knowledge that you will soon be able to get on with your life without the burden of debts.

An IVA is a formal agreement and is legally binding, which means you will never face any further legal action unless you fail to make your payments.

The IVA is a private agreement, unlike bankruptcy, and your professional status will therefore remain unaffected.

Interest on your repayments will be frozen and no further charges can be made by the creditors as long as your make your monthly payments.

You can still take out or change a mortgage while on an IVA, and you will also be granted a greater degree of control over your assets including your home.

You will not have to deal with any of your separate creditors, which means you will not receive any more repayment requests.

Cons

IVAs are only available for unsecured debts over a certain value, which is usually stipulated as around £12,000 or £15,000.

During the lifetime of the agreement, which is five years, you will not be able to take out any further unsecured loans.

You will be required to make monthly payments in excess of £180 or £200, which means the IVA is not suitable for people who cannot manage to meet these payments.

Your credit rating will suffer as a result of taking out an IVA, and it will be hard to get any further credit for a while after the IVA has come to an end.

Although you will have a greater degree of control over any property that you own, you may have to release any equity on it as part of the agreement, as well as on any other valuable assets you own.

Although some debt may end up being written off, you will still be required to pay back significant amounts of debt, as opposed to bankruptcy where you might only have to pay back very little.

The IVA lasts for five years, as opposed to bankruptcy which can last as little as one year.