Why an IVA Could be the Best Way to Reduce Debt

If you are in debt and having money troubles then this can understandably cause a great deal of stress and anxiety and interfere with your life. It is important not to panic, though, as there are always solutions to these issues. One solution which might be right for you is to set up an individual voluntary agreement (IVA).

What is an IVA?

So, what is an IVA? This is an agreement which is legally binding between you and your creditors to pay your debts back over an agreed period of time. An IVA could be an intelligent move if you have at least two separate debts, if your debts are over £10,000 and if you do not want to deal with creditors directly. An IVA is not the best solution if your circumstances are likely to change, you do not have spare income to pay your creditors or if you have small debts.

Benefits

There are a few different benefits to an IVA. The main advantage for the individual is that it is a legally binding agreement which means that creditors must stick to it and they will not be able to chase you up over your debt(s) once the IVA is in place. Additionally, IVAs are time limited so you will only be paying during the IVA period which is usually 5 years. Finally, some of the debt is usually written off when you enter an IVA.

Things To Keep In Mind

IVAs can be a smart move but you must also carefully think through the decision and weight up the benefits/drawbacks. For example, setting up an IVA can be expensive because it is a legally binding agreement which must be set up by a qualified insolvency practitioner. Additionally, you may have to remortgage your home at the end of the IVA and any savings and/or your pension may have to be used.

Staying On Top of Finances

An IVA can be an effective way to clear your debts but if you do decide to enter one you must make sure that you keep on top of your finances. One excellent way to do this is to set up an IVA bank account with a specialist like Think Money. These accounts can make money management simple by dividing your income into essential payments (such as IVA payments and rent) and then the rest can set aside for day-to-day spending.

Debt can follow you round like a stormy cloud, but there are always solutions available. An IVA agreement can be a smart move for those that are in debt as it will help to get creditors off of your back, help you to clear your debts and even write off some of your existing debt in some cases. As with any legally binding agreement, you must make sure that it is right for you before entering an IVA though.