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Get to know about Individual Voluntary Agreement — IVA Pros and Cons

iva pros and cons

IVA represents an Individual Voluntary Agreement between a creditor and a debtor. These days IVA can be used by every person, but previously it was used only for business purposes. You have to go through various procedures before getting approval for an IVA. 

This agreement is a legal procedure and is approved by the court. When you are approved for an IVA, then all your debts will be stopped and you will get complete protection from your creditors. You will have to pay a certain amount for an agreed time period, provided by your lender, and it will be easier for you to clear your debts, with the help of an IVA.

Individual Voluntary Agreement will help you to avoid bankruptcy and you do not have to attend court for the non-payment issues. But, IVA comes with lots of disadvantages also. You should understand your situation before applying for an IVA because it might not be the best choice for you. Hence, you should be completely aware of all the IVA Pros and Cons. 

Pros of IVA — The Benefits that you Gain

If you are struggling with your debt, then you should go with Individual Voluntary Agreements because it will help you to avoid bankruptcy and no creditors will be able to come to your home to ask for the payments. Actually, there are a lot of advantages in this legal agreement. Most importantly you can become debt-free completely. 

Debt Free and Payment Demand Stop

When you settle your IVA, then it will last on your credit report, not more than 5 years. You will notice that your credit report will start to improve after settling the IVA, and you will be able to get loans from the lenders. 

When you struggle with a poor credit report, you might get calls from your creditor asking you for payments. But, as soon as the application of your IVA is approved, then your creditors will stop calling you because they will be bound by law. When you are on an IVA, creditors are highly restricted to ask you for payments, through phone or letter. 

Low Rate of Interest 

You might be struggling with the payment of the interest and it might be very high, and you are struggling to afford it. When you are approved for an IVA, then you will not have to pay a high rate of interest. You only have to pay the agreed amount by your creditor. 

Your lender is restricted by law to add any extra charge like a late payment. You should keep in mind that all your accounts are covered by the agreement. So, your creditor has no right to ask for more money from you. 

One Time Monthly Payment

When you are approved for an IVA, you will only have to pay once, every month. It will be decided how much you have to pay at the beginning of this agreement. You don’t have to feel pressurized as your creditor is informed about the amount you can afford to pay, every month. Yes, you might have to pay a higher amount in certain cases. 

Protection of Home and Asset 

When you have high debt, you might have to sell your home forcefully and you might be bankrupted. But, when you are under an IVA, you can protect your home, as nobody can sell it forcefully. You should keep in mind that you have to give a certain amount, at the end of your IVA, via the remortgage. Thus, knowing about the IVA pros and cons are very important. 

When you are approved for this agreement, then you will be able to protect your liabilities like your car. Everyone knows that a car is a very important aspect to communicate with your work. If you would like to keep your other assets, then make sure to discuss with your creditor at the beginning of IVA. 

But, you need to keep in mind that, you might have to pay an extra charge to keep your assets. Your creditor will decide whether you are approved or not for this. 

Improve Credit Score and Payback

Once you have completed all your arrangements, you will be able to borrow money and an increase in credit rating will be noticed. You will free yourself from your previous debt, and not be considered as blacklisted for a lifetime. 

You can avoid bankruptcy by availing IVA, and able to return as much as possible to become debt-free, as early as possible. In certain cases of bankruptcy, there is no payback policy. But, when you are under an IVA, you can pay back your creditor as much as possible to become completely debt-free. 

Cons of IVA — What it Lacks?

Before considering an IVA, you should be aware of its disadvantages. Getting to know about the IVA pros and cons, will help you have a clear idea. Because this agreement might not suit your situation, and you might face more difficulties. Hence, keep in mind the disadvantages of an IVA. 

Free Some Assets 

You might have to free some of your valuable assets or property at the beginning of this agreement. Sometimes, creditors might provide an extra year, if they find that a portion of your property is not easy to sell. Thus, your IVA will become 6 years instead of 5 years. 

Restricted from Borrowing While the Agreement

You should keep in mind that you can’t utilize your credit or store cards while on an IVA. You have an option to change your current mortgage, or you are even allowed to get a new one. If your IP approves, then only you can borrow up to 500 pounds, and a prepaid card can be used. 

Destruction in Credit Rating 

Credit rating will be hampered during an IVA and you are restricted to borrow at the time of your IVA period. It will be hard for you to get money right after settling your IVA. This period depends on your situation and it varies one person to another. 

Lasts for a Long Period of Time

IVA lasts a long time compared to bankruptcy. If you are considering IVA pros and cons, then bankruptcy only lasts for a year, whereas IVA stays for 6 years. Sometimes, bankruptcy might last for 3 years depending on your situation. 

You will have to pay more than you can afford during the 5 to 6 years of your IVA, whereas bankruptcy is completely the opposite of this. If you are under bankruptcy, then you will have to pay a minimum amount. 

Reputation Damage 

If you are on an IVA, then you might not be able to continue with your job, as some jobs do not recruit employees who have IVA. Because of that, you might be sacked from your job. It will be mentioned in the terms and conditions of your employment. 

When you are under an IVA, then people can find your name in the insolvency register. Your reputation might be hampered because of this. 

Lastly…

You now have a clear idea about IVA pros and cons. Well, we agree that the advantages sound appealing but never ignore the disadvantages of individual voluntary agreement or IVA. Before applying for this agreement make sure that it suits your situation. After coming to complete transparency, then only apply for IVA.