If you have significant or unmanageable debts, you may be considering an Individual Voluntary Arrangement, or IVA, as a way to consolidate and pay off what you owe. Before you dive into the IVA process, you’ll likely have a number of questions that need answering.
That’s why we’ve put together five of the most commonly asked questions about IVAs, to help you weight up IVA pros and cons to decide if it is the best option for your circumstances.
1. How much does an IVA cost?
Unlike bankruptcy or other debt consolidation options, there is no set fee that is charged for an IVA. Different IVA providers will set their own fees, which may be a flat fee or on a sliding scale dependent on the size of your debt. It’s best to shop around for your IVA to find an affordable option for you, but Citizens Advice says you should be prepared to pay an average cost of around £5,000.
2. Will an IVA affect my partner’s credit rating?
Whatever happens to your credit score or financial situation, lenders, creditors and credit rating agencies can only put this onto your credit file, and cannot touch your partner’s credit file. Despite this, if you have joint finances, such as a joint bank account or a joint mortgage, your financial history may be taken into account when decided whether to provide credit in the future to your partner.
3. What debts does an IVA include?
An IVA can be a really useful way to get on top of your debts, but unfortunately, not all types of debt can be dealt with in this way. You can generally include all debts, apart from:
- Business debts
- Maintenance arrears
- Child support arrears
- Student loans
- Magistrates’ court fines
- Mortgages and secure loans
- Hire purchase agreements
If you have any of these debts, you’ll need to make sure that you have enough money to pay these off before paying off an IVA.
4. Does an IVA affect your credit rating?
In short, yes – entering into an IVA will affect your credit rating. Despite this, it’s worth remembering that if you have significant debts, your credit score will likely already have suffered. An IVA does not remain on your credit score forever, so you will be able to build your financial health up over time to regain a good credit rating in the future.
5. How long does an IVA last?
A typical IVA last for five years, but in some cases, you may find your IVA is extended to six years. Alternatively, depending on the size of your debts and how much you’re able to pay off, the length of your IVA may be shorter. No matter how long your IVA lasts, it will be recorded on your credit file for six years from its start date.
If you’re entering into an IVA, our basic current account with prepaid Mastercard®️ can help you to pay off your debts and rebuild your financial health. Find out more or apply today.