Why Use an IVA?

The Problem With Other Debt Solutions
When personal debt has become out of hand, there is normally not enough money each month to maintain the minimum monthly payments on personal loans, credit cards and store cards. Something has to be done before payments are missed. There are many organisations who advertise debt solutions. Their biggest claim is to be able to reduce monthly loan and credit card payments to a single affordable amount. Such reductions are often possible to achieve and can provide peace of mind. However, these agreements are normally informal “gentleman’s agreements”.
They are not legally binding and as such have significant hidden problems:

• Although they may greatly reduce your repayments each month, you will still have to pay all of your debt back. This could take a very long time. For example, if you owe £20,000 and reduce your monthly repayments to £200/mth to fit your budget, you will be repaying your debt for at least 9 years.
• Your creditors do not have to stop adding interest and late payment charges. Some may do so for a short period (perhaps 6 months), but will then want to review the situation. This means that the reduced amount paid each month may only just cover the extra interest being added. If this is the case, then the debt will never be repaid.
• Your creditors can break the agreement at any time and asked for increased payments or add further interest. As such you never know exactly where you stand and may be always waiting for that next payment demand letter to come through the post.

So Why Use an IVA?
An IVA will overcome the problems outlined above. It is an agreement with your creditors to make a single reduced payment each month which lasts for a sensible period of time (normally 5 years). Once agreed, creditors are not allowed to add further interest or charges to your accounts by law. The agreement is fixed meaning that creditors can not randomly demand changes to it. The IVA therefore offers a real solution with “Light at the end of the Tunnel” where informal debt solutions as described above do not.

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