What are the Pros and Cons Associated

The nature of IVA is to hold on your debts that are to be paid. Previously, IVA was usually used in business, but now people can easily avail it for their personal purposes. Moreover, IVA also delivers you the protective shield against the legal actions like bankruptcy, court notices, payment defaults and others, taken by the creditors. 

IVA is a process that can help you to take over your lost financial control. So, before availing its service, get to know its advantages and disadvantages, as these are necessary. With the help of this, you can well judge your debt-repayments and current financial situation and decide your next step. So, let’s get to know the IVA pros and cons in detail.

What are the Pros and Cons of Getting an IVA?

An Individual Voluntary Arrangement (IVA) is one of the viable ways to clear off your debts. However, being a formal arrangement, it is available to people who fulfil certain criteria. Further, this arrangement is not suitable for all people. So, you must get an pros and cons of iva only after consulting experts.

IVA Pros and Cons

Similar to all other types of debt solutions, an IVA has some pros and cons. And, you must make sure that it offers more benefits than risks. Only after that should you proceed with this arrangement. Here, we will take a look at the significant pros and cons of IVA.

Pros of IVA

An Individual Voluntary Arrangement has a lot to offer to people who qualify for it. So, let us go through its benefits first. Here are some of the biggest pros of an IVA:

Repayment Plans are Affordable

You might often fail to keep up with your creditor’s repayment plan. However, the creditors might not always provide you with that. By getting an IVA, you can get a repayment plan based on what you can afford. The insolvency practitioner would decide your monthly payments after analysing your earnings and spendings.

Your Creditors Cannot Hassle You

In an IVA, you do not have to deal directly with your creditors. An insolvency practitioner would manage your repayment. Moreover, your creditors cannot contact you to pressurise you during this period. Not only that, but they also cannot start any legal proceedings against you.

Your Assets Remain Protected

Creditors can secure their debt against your assets through legal action. But, as we have seen, they cannot take such actions when you have got an IVA. So, they would not be able to secure their debts against your assets while the arrangement lasts. Provided that you complete the arrangement, your property would never have to face any legal action.

All Interests and Charges are Frozen

Your debt usually keeps rising as you struggle to pay it. As a result, you have to pay a significant amount of interest. In some cases, you might also incur penalties for late payment. But, once you get an IVA, your creditors cannot charge you further interests and penalties.

You Can Clear Your Debts in 5 Years

An IVA usually lasts for 5 years. In some cases, this means you can clear your debts faster with this arrangement. But, what about any unpaid debt that remains after this period? If you are wondering, they would be written off if you complete your IVA.

It Is a Discreet Arrangement

With an pros and cons of an IVA, you can avoid the publicity that comes with bankruptcy. And, people from certain professions can significantly benefit from that. An IVA is a legally-binding arrangement and does not allow your creditors to disclose it to anyone. And, that makes it a great alternative to bankruptcy.

Cons of IVA

You need to take risks into account before getting an IVA. After all, there are quite a few of them. So here are some of the significant pros and cons of an :

It Affects Your Credit Rating

The credit rating determines your ability to pay back your debt. And, clearing your debts with an IVA can affect your credit rating significantly. So, you might face trouble in getting credit at suitable interest rates after completing this arrangement. However, an IVA does not affect your credit score as much as some other debt solutions do.

It Does not Deal with Secured Debts

Are you dealing with one or multiple secured debts? Then, you cannot include them in your IVA. So, this arrangement is only available for clearing your unsecured debts. So, you might want to look for other viable solutions to protect your assets. Moreover, you might have to release some equity by remortgaging your property in an IVA.

You have to Strictly Follow a Budget

During an IVA, your insolvency practitioner would set a budget for you based on your income. And, you cannot spend more than the decided amount. Otherwise, that would be a breach of the terms of the arrangement. So, you might want to consult experts for other options, if you do not find this term suitable.

Your IVA Would be Mentioned in the Insolvency Register

Even though this arrangement is only between you and your creditors, it would feature in an insolvency register. Moreover, people can search this register and come to know of your IVA. Yet, you can be assured about the discretion of this arrangement as it is legally binding.

IVA: Advantages

Here is the list of advantages associated with IVA. Having a large amount of debt can be a nightmare, and this is where IVA comes to work. Both IVA pros and cons are equally important, but at first, get to know about the positive way outs.

1. The Elimination of the Debts

IVA will provide you with additional assistance in clearing off the debts. Things will be much different after opting for an IVA plan. The time span of IVA is bounded to 60 months, which is 5 years. 

During this period, you don’t have to take any kind of headaches regarding the payment of debts. A reasonable percentage will be given to you and according to that, you have to make the payment, on a monthly basis. When this period is over, you will be free from all your debt. 

2. No Interference of the Creditors

Are you really tensed about the arrival of bailiffs? Then, IVA will protect you from it. After accepting a plan of IVA, your creditors have no right to force you for the debt repayment. In addition to that, during the IVA period, you will not receive any type of text messages, emails, calls, letters, surprise visits and hassle from the creditors. 

If your creditors accidentally visit you, then necessary IVA papers will be there to protect you. Show it to them and ask them to stop their activities. If they don’t listen, legal action will be inevitable. 

3. You have to Pay Once

When you have more than one creditors, then the IVA will play its dominant role. All of your debts will be consolidated by the IP (Insolvency Practitioner) by calculating one minimum payable amount. Just pay it to your IP and he/she will divide it amongst all of your creditors. In the generalized view, with the overall guidance and being a part of IVA, the lowest amount starts from 70 pounds per month. 

4. No Interest and No Additional Charges

The amount of interest and other additional charges will face a halt. Otherwise, the payable amount can turn into a large sum of money, and you can face a hectic situation. IVA helps you to combat these situations. As you don’t have to give the additional charges, the payback amount of the debt becomes cheaper. 

5. Protection to your Assets

Several creditors might demand the mortgage of your assets when you are late for debt repayments. But, IVA will help you tackle every matter. On an IVA approval, there are no rights of the creditors to ask you regarding any type of mortgages. In addition to that, they will also never ask you to sell your property for the quick debt-repayments. 

IVA: Disadvantages

Detailed information about the IVA pros and cons can help you to decide, whether you should or shouldn’t go for an IVA. After knowing about the advantages, it is important to heed towards the disadvantages.

1. The Credit Score: A Negative Impact

You gain certain points on repaying the credits on time. But, on availing the IVA, it isn’t going to be a private matter, and everyone will get to know about it. All the creditors will eventually know how much struggle you have gone through while paying back the debts. 

Considering as insolvent in the credit report, the deterioration will take place in terms of the credit score. If this continues, then you will face many difficulties in picking up the credits, in the near future. Somehow, if your future credits get approved, then the interest rates will be higher than usual. 

2. Selective Debts

Never think that all of your debts will be included in the IVA. There are some exceptions regarding that. The IVA will not cover student loans, fines issued by the court, support for children and their maintenance, loans for funds and others. That is why you need to repay all of these debts as decided by the arrangements. 

3. The Extension of Equity

The number of equity assets present in your home might be at risk as you might have to release some of it. This will take place at the final stage of the IVA. If you cannot do this, then your case for the debt-repayment will get enhanced to another 12 months, automatically. 

4. The Necessary Eligibility Criteria

Everyone cannot afford an IVA. There are some rules and regulations, as well as criteria that you need to follow. If your debts are more than 5000 pounds, with more than 2 active creditors, then only you are well eligible for IVA. Moreover, your source of income must be on a monthly basis. 

5. The “Must Pay” Monthly Payment

While the IVA is active, a certain monthly payment is necessary. You have to pay that amount at any cost to the IP. In case, there is a missing payment, the cancellation of IVA will be inevitable. Therefore, as per your earnings, calculate the amount and keep it safely for debt repayment purposes. 

6. The Cost of IVA

IVA doesn’t come free of cost. The fees will solely depend on the amount of money that is still pending as a debt. The larger the amount of debt, the fees will also get its extension. That is why, before affording the IVA, make sure that you talk about the fees, as soon as you join the IVA company representatives. This helps to clear the fact about IVA pros and cons. Only after that, come to a decision. 

7. It’s Not Private, but Public

Receiving the facilities of IVA will highlight the agreement made, on the public database. This database is known as the Insolvency Register in the United Kingdom. So, the one, from whom you might be planning to receive credits, can easily view the entire credit status. Moreover, they can also search for further details from you. If this happens, then you might not get credits from anyone, in the near future. 

Contact Our Experts for Advice

Are you thinking of getting an IVA? Then, we can help you find out whether you qualify for it. National Debt can also help you explore the other options you have for dealing with your debt situation.

Summary… 

Hopefully, you have got a good idea about IVA and its pros and cons. Moreover, you might have received a brief knowledge about how the IVA will help you regarding the debt-repayments. In order to calculate the IVA, you can use some free IVA calculator applications present on the web. But, if possible, select a good and reputed IVA organization without any type of compromises. Are you in a debt and still wondering what to do next? Start right now by availing the IVA as you already know about the IVA pros and cons.