How To Get a Loan for People With An IVA

An IVA is a worthwhile solution for many people who find themselves in debt. 

But, entering into an IVA means you have to agree to certain conditions, including limitations on your ability to take out loans. 

If you’re wondering whether and how you can get a loan for people with an IVA, read on.

Am I Allowed to Take Out Loans With an IVA?

During the period in which your IVA (Individual Voluntary Agreement) is ongoing, you cannot borrow more than £500 without your Insolvency Practitioner’s (IP) permission. 

This includes all types of products from commercial lenders, such as IVA payday loans from any direct lender and personal loans, as well as overdrafts, and credit cards.

Can I Borrow Money From Family and Friends During My IVA?

Regardless of where you get the loan from, whether it’s family, friends, or a certified lender, you can’t take more than £500 without violating the terms and conditions of your IVA. 

You will need permission from your IVA supervisor to take a loan that’s over that amount.

Keep in mind that your IP won’t allow you to take a loan unless it’s an emergency expense. If you’re struggling with your monthly budget, you should contact your IVA provider to discuss your options. 

IVA Early Settlement Loan

During the early stage of your IVA, your IP won’t agree to move forward with an effort to settle the IVA with a loan because your creditors are unlikely to accept money coming from yet another lender. 

However, there are occasions when you can settle your debt early, usually after 3 years of being in an IVA. 

In this case, you’ll first need to talk to your IP. They will consider the offer and if they find it reasonable, they will call for a variation meeting (which is called to make changes in an IVA). 

At the meeting, your IP will present your offer (a lump sum) to the creditors. If 75% of them (by value) accept the offer, your IVA will be considered complete and you’ll no longer have to make monthly payments toward it. 

To improve the chances of your offer being accepted, you’ll need to show that the money is coming from a legitimate source and have a good reason for settling the debt early.

How Much Would I Need To Settle My IVA Early?

The amount you’ll need to settle your IVA early depends on how much is left in the arrangement. 

This decision lies solely with the creditors so it’s best to aim for bids that are as close to the sum you owe as possible.

Other Funds That Can Settle an IVA Early

In most cases, you can settle your IVA early with money (in the form of gifts) from friends and family, or a large inheritance.

If your IP agrees to call a variation meeting, you will have to provide certain information about the third party that’s providing the funds to end the IVA. 

This can include their ID, consent, and proof of funds.

Will The IVA Affect My Credit Rating?

If you get into an IVA, it will be recorded on your credit report and your credit score will go down as a result.

Your IVA will stay on your credit report for six years, from the starting date, regardless of whether you settle the IVA early (if you pay back what you owe earlier, the IVA on your credit report will be marked ‘complete’).

Your lowered credit score will mean that you’ll have trouble getting a loan.

Even if your IP permits you to get a loan, you will find it difficult to locate a lender willing to lend you money. That’s because lenders always conduct a credit check when considering an applicant’s loan application.

A bad credit score indicates that you’ve had difficulty repaying debt in the past, so they’ll likely see you as a high-risk borrower. This can result in your application being rejected, especially if you apply with a traditional lender.

You could still find loans for people on IVA but with a higher interest rate.

Getting a Loan After An IVA

You can get a loan after an IVA, but you’ll struggle to find good rates or a lender that’s willing to offer you a loan until the IVA drops off your credit report. 

If your IVA is still visible on your credit report, your best bet would be to go to a specialised (rather than a traditional) lender. 

Before agreeing to any offers, make sure that you can afford the repayments, as missed payments can plummet your credit score and lead to further financial problems.

Bottom Line

So, is it possible to get a loan for people with an IVA?

The short answer is yes – but it’s not always easy. You’ll first need to get permission from your IP and then find a lender that offers loans to people with an IVA. There are many lenders who are willing to work with borrowers who have a less-than-ideal credit score, but you will need to shop around to find the best deal.