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.
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.
Here are the top 10 payday loans in the UK (including payday loans for 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.
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.
You may be interested in: What happens if I ignore a CJJ?
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.
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.
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.
Looking for lenders that offer loans to people with a bad credit score? See our list of the best bad credit lenders in the UK.
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.
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.
Guarantor loan providers tend to vote against IVAs. This means that if more than 25% of your debt is with one provider, the IVA usually (not always) gets blocked. With the guarantor loan factored in, we believe an IVA is unlikely.
It is possible to get some type of loan and credit with an IVA on your credit report.
An IVA can be settled early with a lump sum, but only if 75% of your creditors accept your offer.
You cannot apply for a loan larger than £500 while your IVA is still active without permission from your IP. If they allow, you could apply for a loan for people with an IVA.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.