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Money worries are not just a short-term problem and if you are among the thousands of people who are struggling to make repayments on debts, then you might be considering entering into an Individual Voluntary Arrangement (IVA). As well as dealing with your current debts, you will probably also be thinking about how an IVA can affect your credit rating in the future. While this is a legitimate concern to have, you may find that taking out an IVA creates fewer problems when trying to obtain credit in the future than you might have thought. IVAs are an effective way to manage - and ultimately clear - your debts if they are getting out of control and you are struggling to make regular repayments. In simple terms, an IVA is a formal agreement between you (the debtor) and your creditors, which sets out a structured payment plan to repay some or all of your debts. A licensed insolvency practitioner will need to set up the IVA and will also advise you about repayments based on your financial situation. Once you decide to take out an IVA, your adviser will put together a proposed repayment schedule. After you agree to it, the document will then be sent to your creditors and at least 75 per cent of them must also agree to the IVA. Depending on your situation, an IVA can make provisions for you to pay back all or just some of your debt. As a general rule, an IVA will take five years to complete. However, some plans can last for longer. This is usually based on how much you owe and how much you can afford to repay each month. In terms of your credit rating, taking out an IVA may not be as detrimental as you may think. One of the conditions of entering into an IVA is that you are not allowed to take out any unsecured debts during the course of the arrangement. These include personal loans and credit cards. But, because the plan will run for a minimum of five years, this means that very few organisations will have any need to review your credit rating anyway. However, your IVA has to stay on your credit file for a minimum of six years from the date that you start the IVA, which means that once you have successfully cleared your debts, there will be a further 12 months where potential creditors can see the arrangement on your file. On completion of your IVA, you will be sent a certificate to prove that the agreement was met. This must be forwarded on to credit reference agencies, which can then update your file accordingly. You might find that in the year following the end of your IVA, you struggle to take out an unsecured loan or credit card. Financial institutions may view you as too much of a risk to lend to in this way. Another thing to be aware of is that lenders may offer you loans or credit cards but these will carry higher interest rates because you are a high-risk borrower following your IVA. If you’re looking for an IVA then Debt Options can help you find the right solution to your debt problems. Our team have over 11 years experience assisting people with serious debt problems and have helped thousands of people with debt management programmes or IVAs.
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