Can I get Credit with an IVA?

Credit can sometimes be a good option if you need extra funds to keep life running smoothly. It can make things easier in many ways, from allowing you to own a home through a mortgage to helping you afford unexpected costs. However, it can be easy to fall behind on payments and debt can slowly creep up on you.

If you’re in an IVA, this may leave you wondering if you’re still eligible for extra credit.

Whilst you can get credit while on an IVA, it will be a lot more difficult. Credit needs to be approved by your Insolvency Practitioner if it is over £500, and even this does not guarantee your application will be accepted.

What is an IVA?

An Individual Voluntary Arrangement is a debt payment plan available in England and Wales. Arranged by an insolvency practitioner (IP), it sets out when and how you will repay your creditor, considering your financial situation and ensuring all repayments are affordable.

The agreed duration of the IVA is usually between five to six years and can be used to repay unsecured debts -from bank overdrafts, personal loans, credit cards, and store cards.

The key benefit of an IVA is that all interest and charges on debts included in the IVA are frozen. This prevents you from having to pay extra interest accumulated on top of your original debt. However, it is important to note that IVAs do also have some downfalls. For example, it does show on the insolvency register.

Can I get credit while in an IVA?

It is difficult but not impossible to get credit with an IVA. The terms of an IVA outline that any credit agreements that are taken out during the IVA should meet certain criteria and be pre-approved by the IVA company prior to being approved.

For example, if you wish to borrow more than £500, then you must get permission from your IP first. They will consider certain factors, like how long it will take you to repay and whether you are able to repay the credit provider on top of your current IVA payments.

Borrowing more than £500 without the permission of your IP would breach the terms of your IVA, which could result in the IVA being terminated.

It is important to note that even if you do get permission from your IP your credit application may still be denied. This is because any creditor will want to run a credit check on you. This will show that you are on an IVA and have a history of missing credit payments. This could suggest that approving you for credit is a risk to the company.

Please note: Every application that conducts a hard credit check will show on your credit report. Additionally, any rejections will also be added to your credit report. Therefore, any applications for credit should be carefully considered, and should only be completed if you think you have a good chance of approval.

Can I get a loan to pay off an Individual Voluntary Arrangement?

It is unlikely that you will be able to get a loan to pay off an IVA. Using a loan to settle the term of your IVA early can seem tempting, but getting one is hard and the companies that are willing to loan to you often charge high interest, putting you at risk of further financial troubles.

Additionally, you will also need your IP’s approval to get the loan, be at least halfway through your IVA, and be making your repayments on time.

If you are struggling to pay your IVA, there are some other alternatives that do not include accessing further credit:

• Adjust your budget – you may be able to lower your monthly payments if your proposed budget is not working. Contact your IVA provider and explain your situation.
• Ask for a payment holiday – IVAs do allow a level of flexibility, so you may be able to skip payments for a month or two. (In this case your IVA duration would be extended by however many payments you miss).

Can I get a credit card with an IVA?

It is possible to get a credit card with an IVA, but it may be challenging to find a lender willing to accept the application. Additionally, a person on an IVA is likely to be given a smaller credit amount.

Does an IVA affect my credit rating?

Having an IVA does affect your credit rating. It will lower your credit score and negatively affect it for as long as you are in one.

If you are looking to improve your credit score whilst on an IVA, the best course of action is to keep up with your repayments. This avoids causing any further damage.

How long does an IVA stay on your credit file?

An IVA will remain on your credit file for six years from the date it was approved.

Can I get finance after an IVA?

Once your IVA has been completed successfully you should be able to obtain credit more easily. You would no longer need approval from an IP to be issued credit.

However, once the IVA is complete your credit score will be low. This might make obtaining credit difficult. Hence, once your IVA is complete, we would recommend trying to build up your credit score over time.

Overview

• An IVA is a long-term commitment that can limit your spending and affect your credit score.
• It can, however, be an effective way to help settle debts for people who are struggling.
• You should always seek debt advice before deciding on a debt solution.

How can Consolidation Express help?

Unfortunately, people on an IVA do not meet our loan criteria so we can’t help in this situation. However, if you’re looking to repay multiple unsecured debts, and are not currently on an IVA, a consolidation loan may be a good option.

Our panel of lenders considers all credit scores! Fill in our free online application and, if approved, you could have the money you need straight to your account.