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Tag: IVA

Close up portrait of a man in debt showing empty wallet

The 5 Stage Process of Dealing With Debt

Written by Alex Swindells on . Posted in Debt help.

People with debt problems often hide their situation because they are ashamed. But the reality is, that it is more common than we realise. In February 2022, the average adult in the UK owed £33.410 in total debt.

Mounting debts create a huge amount of stress and we all have coping mechanisms to deal with this. We have identified 5 stages many people might go through as debt begins to spiral out of control. Consider if these ring true for you, and if so, understanding where you are in the process could make it easier to intervene and take action to resolve your problems.

1. Denial

man giving a thumbs down

Debt is incredibly common and most people use credit in some form. Borrowing an affordable amount on a credit card and paying it off right away can benefit you. But when your debts get out of control, it’s important that you address the problem right away. Unfortunately, the first stage of dealing with debt is usually denial.

Even though the payments are out of control, people tell themselves that they are borrowing responsibly and they will easily be able to get back on track next month. Their spending habits don’t change, so they still make a lot of luxury purchases and don’t save money or pay their debt.

Emergency spending is also common in people that are in denial about debt because they fail to plan for the future. When all of your money goes into credit card payments and you don’t have any emergency savings, an unexpected payment pushes you further into debt.

A large proportion of people in debt denial will overspend and build up large credit card debts. Ultimately, this means that the situation gets worse every month and people in denial tend to avoid looking at their bank balance or credit card statements because they are afraid of the outcome.

2. Panic

Tired teen girl feeling dizzy, having panic attack and massaging her temple.

Denial can only last so long before you are forced to face your debt problems. Interest payments will increase on unpaid debts and the situation will snowball. Missed payments and unpaid bills start piling up and creditors will send letters and call you on the phone, demanding payment. Eventually, collection agents may start coming to the house too, so it is impossible to avoid the situation. This is when panic sets in. Once people realise that they are in a serious debt situation and they don’t know how to deal with it, they usually react in one of two ways; some people accept that they are out of their depth and seek help with their problems. However, some people try to manage the problem alone and move into stage 3.

3. Self-Determination

Successful businesswoman working hard on laptop computer in her office dressed up in white clothes.

Sometimes, people believe they can fix the problem themselves or are too proud to ask for help. Depending on the severity of the problem, some people can make positive changes to resolve their situation themselves and get back in control. But often, small changes to habits or using money-saving tricks only make a tiny dent in the large debts. Even getting a second job and making big cutbacks on spending can fail to solve the problem, especially if it has been ignored for so long. 

Although people can buy themselves a bit of time, serious debt problems cannot always be dealt with on your own. In many cases, it is too late for budgeting and you need to consider formal debt solutions. It is a good idea to have a realistic look at your situation and what you can practically achieve to help. For some people, it might be best to skip the self-determination stage and seek professional advice as soon as they recognise the problem, rather than delaying the inevitable.

4. Frustration

Frustrated woman with head and glasses in hands. Laptop open in front of her with paperwork on the desk.

Eventually, people get to a stage where they have tried everything and their debts are still increasing every month. At this point, the frustration begins and the debt problem starts impacting other areas of their life. Relationship problems are very common because people hide the scale of the debt. When they recognise that they cannot fix the problem and they need to admit how bad the situation is, this can lead to family tensions. People also try to shield friends and family from the situation, so they will isolate themselves.

Realising that they have tried everything and nothing has worked also creates a feeling of helplessness. This, coupled with the sheer stress of the situation, can lead to mental health issues like anxiety and depression.

If you do find yourself in this position, you can fill out a ‘debt and mental health evidence form’ and send it to your creditors. This gives them your consent to access information from your doctor about your mental health, so they are aware of the impact that debt is having on you. Many creditors will take this into account when contacting you about payments or negotiating a payment plan with you. 

5. Acceptance

Man stamping 'acceptance' in notepad.

Acceptance is the end of the debt cycle. After trying everything else and seeing the impact that it is having on their lives, people finally accept that they need help dealing with their debt issues. When people eventually reach acceptance, they seek the advice of a debt solution company like Swift Debt Help. 

If you have debts with multiple creditors and you are unable to pay, an Individual Voluntary Arrangement may be the right option. This allows you to write off a portion of the debt and consolidate all of your different debts into one manageable payment. It also stops creditors from chasing you, so you can take the pressure off and focus on repaying the debts.

Being trapped in a cycle of debt can feel hopeless and you might experience all of these stages, but help is out there. At Swift Debt Help, we can give you advice about different debt solutions and support you through the process. There are processes you can enrol in before you get to the debt recovery solutions stage, so you can protect your financial future,

If you are looking for a way to solve your debt issues, our excellent solution finder tool can help you find the right processes for you. Alternatively, get in touch directly and our expert team can give you all of the advice you need.

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Family Keeping Records of Expenses

What Are The Differences Between Good And Bad Debt?

Written by Alex Swindells on . Posted in Credit Score, Debt help.

Not all debt is considered bad debt. There is such a thing as good debt, which can benefit your financial position.

For example, good debt can help to improve your credit score, making it easier to apply for credit and to be approved for loans at better interest rates. In the long run, this will have positive effects on your life. 

Bad debt, however, will financially drain you, lower your credit score and make it harder for you to better your financial position or apply for loans, such as a mortgage. 

If you are struggling with bad debt, then you may want to consider applying for an IVA (Individual Voluntary Arrangement). An IVA is a legally binding agreement that can be arranged by an Insolvency Practitioner to help you affordably repay your creditors.

In the meantime, to help you understand the differences between good and bad debt, we’ve created a list of the types of debt that fall under each, along with ways to help you go about ensuring you obtain good debt.

What is Good Debt?

Businessman pushing credit score dial towards a good score

Good debt should allow you to improve your credit score. This will help to demonstrate to lenders that you can effectively manage your finances, which will open further credit options for you.

To obtain good debt, careful planning needs to be involved. For example, you need to have a budgeting plan in place to ensure you can afford repayments in the long term. 

Examples of good debt include:

  • Taking out a loan to open a business or grow an existing business. With a business plan and budgeting plan in place, borrowing money to help build a business can provide financial stability in the future if the business succeeds. 
  • For educational purposes, such as a student loan to attend university. Repayments will only need to be made once you’re earning a certain amount of money.
  • Applying for a low-interest credit builder card and sticking to the monthly repayments. Late or missed payments will affect your credit score negatively. 
  • Taking out a mortgage to enable you to buy a home. A mortgage is a type of secured loan since it is protected by an asset (in this case it is the house) that can be used as collateral should you not fail to make the repayments.

At a later date, you may decide to remortgage your home to allow you to get a better interest rate. This can be made possible if you have acquired a better credit score since applying for your first mortgage. 

What is Bad Debt?

Drawing of man chained to a debt wrecking ball

Bad debt usually occurs when you apply for unnecessary credit, such as a personal loan, and you haven’t planned how you’ll repay the lender. 

Debt can also accumulate, turning into bad debt if you don’t have the resources to make regular repayments.

Examples of bad debt include:

  • Applying for a car loan. An item that isn’t considered a necessity, such as a new car, quickly depreciates in value and usually has a high-interest rate.
  • An instalment payment plan, such as a phone payment plan. If managed well and monthly payments are made, then an instalment plan can improve your credit score. However, if you’ve opted for a phone that costs beyond your means, then this may affect your ability to stick to the payment plan and it will negatively impact your credit score. 
  • High-interest credit card. For example, credit cards that have a 20% APR or over will make your debts a lot more expensive and harder to repay. 
  • Payday loan. This debt can come with extremely high-interest rates. This type of loan is designed for short-term use, so if you aren’t able to repay the amount when you’re next paid, then the debt will accumulate quickly.

We hope this blog has provided you with a clearer understanding of the differences between good and bad debt.

If you are struggling with debt and would like to find out if you qualify for an IVA, then get in touch with Swift Debt Help, and we’d be happy to assist.  

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Five and twenty pound notes laid out on table

How To Pay Off Debt When You’re Unemployed

Written by Alex Swindells on . Posted in Bankruptcy, Debt help, IVA.

Unemployment can be stressful, particularly if you aren’t prepared for it when it happens. Not only do you have the pressure of looking for another job whilst trying to pay your utility bills and rent/mortgage, but if you’re already in debt, then this can add further stress if you’re unable to make regular payments. 

The average UK person has an unsecured debt of £3,817. The types of unsecured debt include credit cards, personal loans, or overdrafts. 

And, of course, if you’re unable to pay for the cost of living, you may see yourself going even further into debt with no means to repay your creditors. 

Paying off debt while unemployed can be hard; however, there are actions you can take to help limit the amount of credit you use. 

Additionally, there are debt solutions available, such as a DRO (Debt Relief Order) or a DMP (Debt Management Plan), that can help to relieve your financial stress.

Ways to Help Reduce Debt:

It is worth getting in touch with your creditors to explain your unemployment status and, because of it, that you’re struggling to make repayments. Your creditors may give you some breathing space on the proviso that you’ll restart paying your debt once you’re back at work. 

In the meantime, consider the below points:

  • Try to avoid further use of your credit card or dipping into your overdraft. 

Also, don’t be tempted to increase your overdraft or credit card limit since the credit will only help you temporarily, and you’ll put yourself further into debt, particularly if there’s interest to pay, which there generally is.

To help prevent you from using more credit, cut down on your expenditures. Only buy the necessities. Set out a budgeting plan and stick to it. With any money left over, use it to slowly start chipping away at your debt. 

  • Avoid taking out any more payday loans. 

Increasing your debt whilst you’re unemployed will make your situation worse. This is especially the case with payday loans because they tend to have very high-interest rates. 

Options for Debt Help When Unemployed

If you’re in debt and without a job, then it may feel like there aren’t any means to ease your financial situation.  

However, some options may be available to you if you meet certain requirements.

Below, we have provided a summary of these options to help with your debt.

1. Breathing Space

If you live in England or Wales, you can get temporary protection for up to 60 days from your creditors while you consider your options and get debt advice. This is a Government scheme called ‘Breathing Space’.

If you receive it then:

  • enforcement action cannot be taken against you
  • your creditors cannot contact you about debts included in your Breathing Space
  • your creditors cannot add interest or charges to your debt, however you will ultimately remain responsible for your debt repayments

To apply for the ‘Breathing Space’ scheme, you need to talk to a debt adviser who will check you are eligible. If you are, then will submit an application on your behalf. You can look for a ‘debt adviser’ on the MoneyHelper website.

2. DRO (Debt Relief Order)

A DRO allows your debt, and any interest owed, to be put on hold for twelve months. 

To be able to apply for a DRO, your debt must not exceed £30,000, you must reside in England, Wales, or Northern Ireland, and you can’t be a homeowner. 

Once you have a DRO in place, your creditors will be unable to take legal action against you.

After twelve months, when the DRO is complete, if you continue to meet the eligibility criteria, then any outstanding debt will be written off. 

Although this can be a useful solution for many people, one essential criteria that must be met is that you have less than £75 per month left over after paying your essential bills. If you get back into work during the twelve-month period, and you have more than £75 available then it is likely that you will have to find an alternative debt solution.

Woman paying with card via her phone

3. Bankruptcy

Bankruptcy could be a debt solution to consider. This is a legal status where your valuable assets (these do not include ‘tools of the trade’ or items that are necessary for living, such as clothes and furniture) are sold to pay what you owe to your creditors.  

You can file for bankruptcy regardless of how much debt you’re in. When applying, you’ll need to pay £680 to the Insolvency Service. 

Once you’re declared bankrupt, creditors can no longer take legal action against you. 

The details of your bankruptcy will be published on government-owned websites; the Gazette, and the Insolvency Practitioner. 

Additionally, the details of your bankruptcy will go on to your credit report and will remain there for six years.

There are bankruptcy restrictions that you’ll have to abide by, but you are usually released from these after twelve months.

Bear in mind that people in receipt of benefits, with no other income, will not be asked to make a monthly payment contribution into the bankruptcy to reduce their debts. However, if a person does become employed during their bankruptcy, they may be required to make regular monthly contributions.

4. DMP (Debt Management Plan)

A DMP is an informal arrangement between you and your creditors where you use a third-party company to set up a payment plan to pay off your debt. 

Your financial situation will be assessed and a figure decided as to what you can realistically afford to pay each month. 

You’ll still have to pay the full amount that you owe to your creditors; however, since your monthly payments will be reduced, your finances will be a lot easier to manage. 

Additionally, the payment plan is flexible, so if your situation changes, then a new amount that you pay each month can be negotiated.

This is a suitable option for you if you have many unsecured debts (non-priority debts). 

The DMP will come to an end once all of your debt has been cleared. 

Using a calculator for debt management

5. Individual Voluntary Arrangement (IVA)

An IVA (Individual Voluntary Arrangement) is a legally binding but flexible agreement that can be arranged by an Insolvency Practitioner to help you repay your creditors in an affordable way over a set period of time. 

Before the payment plan is arranged and put forward to your creditors, your income and expenditure will be assessed by your IP. This is to ensure that you have enough money each month to pay for necessities, such as your rent/mortgage, bills, and food. 

Once an affordable amount for the payment plan is decided, and if it’s accepted by your creditors, then you’ll have to pay the agreed amount each month and stick to the agreed terms until your circumstances change.

If you find a new job, and your income increases, then get in touch with your Insolvency Practitioner who will reassess your circumstances. If you can afford to pay more towards your debts, then you will be required to do so.

We hope that you’ve found this blog useful by discovering ways to help you out of debt.

If you want to find a debt solution that is right for you, then get in touch with Swift Debt Help, and one of the experienced members of the team will call you to discuss your options. 

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Gas stove utility bills

How To Deal With Rising Utility Bills

Written by Alex Swindells on . Posted in Debt help.

A lot of people are struggling with the cost of living due to many factors, such as the increase in wholesale gas prices which has caused a rise in household energy bills.

The price cap of energy bills is expected to rise again in October 2022. The price cap is the maximum limit a supplier can charge. This expected rise will put extreme pressure on households. 

With the price of goods and other services also being affected by inflation, a lot of people may find it difficult to make utility bill payments on time. If unpaid bills accumulate and a solution hasn’t been negotiated with the supplier, such as the energy supplier, in some circumstances, the service provided can be disconnected. 

If you’re in a situation where you’re struggling to pay your utility bills, or you can see that you’re potentially going to struggle, then there are a few things you can do to help ease your financial pressure. Additionally, there are several debt solutions available which we’ve detailed later in this blog. 

What Can I Do If I Cannot Pay My Bills?

money to pay bills

1. Arrange A Payment Plan

The first thing you should do is try to find a solution with your service provider. 

For example, you could agree to a payment plan, such as paying off your debt in small instalments. 

In the above instance, you would pay fixed and affordable amounts over a period of time. This payment plan should cover any outstanding debts plus any current usage. 

The service provider must take into account how much you can afford to pay as well as how much your consumption is likely to increase in the future based on past usage and metre readings. 

2. Negotiate A Better Deal

Another thing you could consider, if a payment plan isn’t right for you because you don’t have a regular income, is to try and negotiate a better deal with your service provider.

Contact them to explain that you are consistently having trouble making the payments; they may be able to offer you a cheaper deal. 

In the case of an energy supplier, they may offer you a prepayment metre. This is a good option for people in debt; however, it is possible to end up in further debt if you use emergency credit.

What Options Can A Debt Solution Company Offer?

post it note with pay debts written

As previously mentioned, there are various debt solutions available to help people who are struggling financially. Below you will find a brief overview of some of the most popular options. 

Finding the right one will depend on your particular circumstances and needs. A debt solutions company like Swift Debt Help can help you decide what’s right for you.

1. Debt Consolidation Loan

A Debt Consolidation Loan is a term used when you have several debts which you decide to combine into one loan. This can be done by taking out a new loan to pay off your original loans.

This option is suitable if you’re struggling with numerous credit commitments and debt repayments. If you decide a debt consolidation loan is right for you, then you’ll only have to manage one single payment per month, and your overall interest could be considerably reduced.

2. Debt Management Plan 

A Debt Management Plan (DMP) is an informal arrangement between you and your creditors where you use a third-party company to set up the plan and distribute money to them.

If you are eligible for a DMP, a payment plan will be set up based on what you can realistically afford.

A debt management plan can last between five and ten years.

3. Debt Relief Order 

A Debt Relief Order (DRO) allows your debt, and any interest owed, to be put on hold for twelve months. 

To be eligible, you will have to meet the specific debt relief order criteria. For example, your debts must not exceed £30,000 and your surplus income must not be over £90 per month.

After the twelve months of your debt and interest being on hold, and if you continue to meet the eligibility criteria, then any included debt will be written off.

4. Individual Voluntary Arrangement  

An Individual Voluntary Arrangement (IVA) is a legally binding agreement that can be arranged by an Insolvency Practitioner to help you repay your creditors in an affordable way. 

Before the payment plan is arranged and put forward to your creditors, your income and expenditure will be assessed by your IP. This is to ensure that you have enough money each month to pay for necessities, such as your rent/mortgage, bills, and food. 

Once an affordable amount for the payment plan is decided, and if it’s accepted by your creditors, then you’ll have to pay the agreed amount each month and stick to the agreed terms. 

To be eligible for an IVA, you need a minimum debt of £5,000.

This is a solution offered by Swift Debt Help. As part of our assessment of your eligibility, we will discuss with you alternative options, and if an IVA isn’t right for you, we can point you in the right direction for the solution you need. 

If you’d like to find out more about the debt solution available at Swift Debt Help, then contact us, and we’d be happy to assist. 

Request a Debt Assessment

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Pound notes iva debt solution

IVA or Debt Relief Order: Which Is Right For Me?

Written by Alex Swindells on . Posted in Debt help, IVA.

IVA or Debt Relief Order -If you’re in debt and are struggling to find a way to repay your creditors, then there are several formal, legally binding debt solutions that could help you to clear your debts in a more manageable way. You may have heard of an IVA or a DRO but are wondering exactly what each of these debt solutions are. So, we have put together a brief summary of each debt solution below.

What is an IVA?

An IVA (Individual Voluntary Arrangement) is a legally binding agreement that can be arranged by an Insolvency Practitioner to help you repay your creditors in an affordable way. Before the payment plan is arranged and put forward to your creditors, your income and expenditure will be assessed by your IP. This is to ensure that you have enough money each month to pay for necessities, such as your rent/mortgage, bills, and food. Once an affordable amount for the payment plan is decided, and if it’s accepted by your creditors, then you’ll have to pay the agreed amount each month and stick to the agreed terms. 

What is a DRO?

A DRO (Debt Relief Order) allows your debt, and any interest owed, to be put on hold for twelve months. After this time, if you continue to meet the eligibility criteria, then any included debt will be written off. A DRO is an alternative to bankruptcy if you have limited assets and affordability. 

Which is better? IVA or Debt Relief Order?

Now you understand what an IVA and a DRO is, you are probably wondering which would be the best debt solution for you. Below, we have put together a list of some of the pros and cons, which will hopefully help you decide on whether or not an IVA would suit your financial situation, or if a DRO would be the right solution to help you out of your debt.

IVA Pros and Cons

IVA Pros:

✓ Write off unaffordable debt. At the end of your IVA, any outstanding debt will be written off.

✓ You only pay what you can afford. The payment is tailored to your circumstances. As previously mentioned, your IP will assess your income and expenditure to ensure you’ll have enough money for necessities. 

✓ You will no longer be harassed by creditors and/or bailiffs for payment. As long as you stick to your IVA agreed terms, legal action, such as CCJs, cannot be taken against you.

✓ Business owners can continue to trade. 

✓ An IVA is an option for homeowners.

✓ Interest and charges will be frozen. As long as you stick to your agreed terms, your creditors will not be able to add on any extra charges.

IVA Cons:

X There’s still the risk of bankruptcy if the IVA fails. 

X An IVA could affect employment. This does depend on the sector you work in, or are considering working in. For example, working in the financial sector, there may be certain conditions in place regarding IVAs.

X It will negatively impact your credit rating. An IVA will stay on your credit file for six years, which will affect your ability to apply for loans, car finance, or a mortgage.

X You have to follow a strict budget. 

X An IVA isn’t private. It will be registered on the Insolvency Register, which anyone can access

X If you are a homeowner, you may need to release equity from your home to pay off some debts.

DRO Pros and Cons

DRO Pros:

✓ Any future interest and charges will be frozen on any debt you owe. 

✓ Your creditors will no longer be able to take legal action against you.

✓ Your DRO will only last twelve months after which any debts will be written off.

✓ This debt solution is one of the fastest ways to clear your debts.

✓ No monthly payment

DRO Cons:

X To be considered for a DRO, you must meet certain criteria, such as your debts must not exceed £30,000 and you must reside in England, Wales or Northern Ireland. Also, your surplus income must not exceed £75 per month.

X Homeowners are not allowed to apply for a DRO.

X A DRO isn’t private. It will be registered on the Insolvency Register, which anyone can access.

X If your situation changes, and you no longer meet the DRO criteria during the 12 month period, the DRO will be revoked. 

X It will negatively impact your credit rating. A DRO will stay on your credit file for six years, which will affect your ability to apply for loans, car finance, or a mortgage.

So, an IVA vs a Debt Relief Order: which is the right debt solution for you? Hopefully this list of some of the pros and cons for each will have helped you to decide. However, If you’d still like further information on IVAs or DROs, please contact us, and we’d be happy to answer any questions you may have.

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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

IVA Protection

What Protection Does An IVA Offer?

Written by Alex Swindells on . Posted in IVA.

An IVA (Individual Voluntary Arrangement) is a legal agreement that can be arranged with your creditors in order to pay back some or all of your debt. If your application for an IVA is successful, then the agreed payment plan will be set up for you to pay off your debt over a period of time (typically five years) through monthly payments. Once the IVA is in place, your creditors will have to stick to the agreement. 

You might be ready to apply for an IVA, but if you’d still like to know how this debt solution can protect you, then consider the following five benefits of having an IVA below.

1. Debts cannot rise

approving an iva

Once an IVA has been approved, your creditors will not be able to add on any interest or extra charges. As long as you keep up with your repayments and follow the terms of your IVA, then your debt will not increase.

2. Your assets are protected

There are a few common questions asked by those who are considering different debt solutions, such as, will I lose my house with an IVA? The short answer is no, unless you have volunteered to sell it to clear some of your debt. Once the IVA has been approved, your unsecured creditors cannot take further legal action to enforce the debt, such as applying for a CCJ (County Court Judgement) or instructing bailiffs to seek possession of your assets.

3. Protection from changing circumstances

During the lifetime of your IVA, it is expected that your situation will more than likely change. For example, if the agreed IVA payments become unaffordable due to a reduction in income, this does not mean that the IVA automatically fails. Your IP (Insolvency Practitioner) will usually be able to grant you a payment reduction (up to a certain level) and you will also have the ability to request more significant changes to the arrangement through what’s known as a Variation Meeting. This provides an opportunity for you to put forward a revised proposal, detailing any changes in circumstance, for your creditors to consider.

4. Protection from bailiffs

court hammer

Your creditors will not be able to take legal action against you once an IVA has been approved, which means, if you stick to the terms of your IVA, you should not have to worry about being approached by bailiffs. However, it usually takes around four weeks for an IVA to be set up, so during this time, you could still be contacted by people trying to collect money to repay debt. If this happens, you should be honest, and explain that you’re in the process of setting up an IVA.  

5. Pay what you can afford 

When setting up an IVA proposal, your IP (Insolvency Practitioner) will arrange a payment plan by, first, taking into account your income and expenditure. This ensures that you’ll only repay your creditors an amount that you can realistically afford which will allow you to have enough to pay your rent/mortgage, bills, and necessities each month. This is followed up by a yearly review whilst the IVA is in place which will, again, take into account your particular circumstances, ensuring that you will not be paying an unaffordable amount.

These are just a few of the ways that an IVA can protect you and, ultimately, help you to find a manageable solution for your debt situation.

If you want to find out if an IVA is a suitable option for you, then please contact us, and we’d be happy to help.

Request a Debt Assessment

May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

house with keys

How to Get a Mortgage After an IVA

Written by Alex Swindells on . Posted in IVA, Mortgage.

An IVA (Individual Voluntary Arrangement) is a legal agreement with your creditors to pay back some or all of your debt. Your IP (Insolvency Practitioner) will arrange a payment plan on your behalf, taking full consideration of your income and expenditures. You’ll repay your creditors over a period of time, usually through set monthly payments, and, once approved, your creditors will have to stick to this agreement.
Getting a mortgage after an IVA can be challenging; however, there are things you can do to increase your chances of being accepted by a lender. Below, we have briefly summarised some steps you can take, and things to be aware of before contacting lenders, so keep on reading to learn how you can get a mortgage after having an IVA.

Getting Ready

IVA completion certificate

An IVA completion certificate can be used to show lenders that you’ve successfully completed your IVA, having made all repayments, which proves you’re no longer bound by an agreement with your creditors. The certificate can be obtained from your Insolvency Practitioner. As part of the completion process your Insolvency Practitioner will issue this certificate directly to you as well as to all of your creditors.

Saving up for a deposit

It is unlikely you’ll be able to get a mortgage with a small deposit, such as a 5% or 10% deposit, until the IVA has been removed from your credit report. It will take six years–from the date the arrangement was approved–for the IVA to disappear from your credit report.

Once your IVA has completed, you should have some disposable income that you can put towards saving for a deposit. The higher the deposit you are able to put down, the more mortgage options you’ll have.

Working on your credit score

Once your IVA has come to an end you can start looking to improve your credit score. Here are a few pointers that can help:

✓ Check your credit report regularly. Sometimes mistakes are made so it’s worth checking for errors that may impact your credit score. 

✓ Register to vote.

✓ Report rental payments to a free scheme to show a record of regular payments.

✓ Use Experian Boost to unlock information on your salary and council tax.

✓ Request for a ‘soft search’ when applying for credit.

✓ Only use around a third of your credit limit.

✓ Never miss repayments.

You may want to learn more about credit ratings and reports to help you understand why it’s important to build your credit history. 

I’m Ready to Apply for a Mortgage. What Now?

letter tiles spelling out mortgage

Now that you’ve discovered how you can improve your chances of being accepted by a lender, you may have decided that you’d like to apply for a mortgage. Read through the two steps below which should hopefully assist you:

1) Contact a Mortgage Specialist Broker

A specialist broker can add insight into which lenders will be more likely to accept you for a mortgage since there may be lending restrictions based on the fact that you’ve been in an IVA. A specialist broker will also advise you on what rates to expect.

2) Be realistic with your budget

If you’ve had an IVA, you’ll be used to evaluating your income and expenditure and living within a budget. When assessing your eligibility for a mortgage, the lender or broker will be following the same process; however, they are checking on your ability to make a sustainable mortgage payment. Be honest, clear and transparent during this process so that you don’t overcommit to a payment that you will struggle to make further down the line.

By following the above two steps, and by actively saving and working on your credit score, you should be able to put yourself in a good position to successfully apply for a mortgage.

If you’d like to know more about what’s entailed in an IVA, then please contact us, and we’d be happy to help.

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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Finish line

5 Helpful Things To Consider When Your IVA Ends

Written by Alex Swindells on . Posted in Debt help, IVA.

When you enter into an Individual Voluntary Arrangement (IVA), you must make monthly payments towards your debts for the agreed term. But what happens once you have made your last payment? Your Insolvency Practitioner will confirm that you have made all of your payments and you will be issued with an IVA completion certificate. You are now debt free and you can move forward with a clean slate. However, an IVA has an impact on your credit score and your financial future, so there are certain things you should consider doing after making your final payment. Here are 5 helpful things to consider when your IVA ends.

1. Keep budgeting

a person working out their monthly bills

It is likely that the reason you entered into an IVA in the first place is because you were unable to manage your debts. Now that you are debt-free, it is important that you avoid getting into the same situation again. You will have been used to managing your finances within a budget whilst on your IVA; maintaining this once your IVA ends will help you manage your money well and improve your finances.

The additional money that was being paid into your IVA can now be put aside for savings and emergencies. By building a savings pot, you protect yourself against financial emergencies and avoid situations where you are forced to borrow the money you cannot afford to repay.

2. Open a high-interest savings account or ISA

saving money after an IVA

Now that you are more financially stable, you should consider putting money away for the future. Opening a high-interest savings account or an ISA is the best way to do this.

The main benefit of an ISA is that you won’t pay tax on the interest that you earn. However, there are limits on how much you can save each year and you may not be able to access the money right away (depending upon the ISA you take). A savings account, on the other hand, can give you more flexibility. Make sure you choose the type of account that suits your needs.

3. Consider further credit

Once you have completed your IVA, the debts that were included will have been settled. You may be wary about taking any further credit as you don’t want to get into a bad debt situation again. However, if you want to improve your credit score, using credit responsibly is a great way to do it. 

Using a credit card regularly, and in the right way, is one of the most effective ways to build credit again. There are a lot of credit cards available. You may not be able to access credit cards with the lowest rates, however as long as you use the credit sparingly, for small purchases, and make the repayments when they are due then the interest you will pay will be minimal. Creditors will then be able to see that you can maintain payments regularly, and this will help to boost your credit score. 

4. Monitor your credit report

Keeping a close eye on your credit report is beneficial to ensure that it is accurate, to keep you aware of your total credit and monitor for improvements. The 3 main agencies that generate credit reports are:

You can access your credit report by contacting these companies directly. Sometimes you are required to sign up for a paid monthly subscription to access your full credit report, however, there are many companies out there that allow you to access a summary of your credit information for free – search online for ‘free credit reporting’ to find one that suits you. 

Once the IVA is completed, your details will be removed from the Individual Insolvency Register after three months. Details of the IVA will be held on your credit file for six years from the date that the IVA starts. If you receive your credit report and your IVA has not been removed yet, you need to contact the credit agency to rectify it. Sometimes, details are not updated properly and the IVA remains on your report when it shouldn’t. If you send them your IVA completion certificate, they will fix the problem for you.

Check the reports for other errors and discrepancies too. For example, debts can be left on your report even though they have been paid off during the IVA. If there is anything that doesn’t look right, query it with the credit reporting agency and get it corrected. Mistakes like this are more common than you think and they can negatively impact your credit report, so always check your credit reports carefully.

5. Register to vote

person placing vote in ballot box

If you are not already registered to vote, you should do it right away because it instantly boosts your credit score. When you register to vote, details like your name and address are recorded on your credit report. Having these updated details makes it easier for the credit reporting agency to identify you and your score will increase as a result.

While this won’t fix your credit score overnight, it is a quick and easy way to boost it a little before you start using long-term strategies to improve your credit. You can register to vote online here and it only takes five minutes.

Need more IVA advice? Contact us today

If you have more questions about what to do at the end of your IVA, or you are struggling with debt and wondering whether it could be the right solution for you, we can offer the IVA help you need. At Swift Debt Help, we have a wealth of experience helping people manage their debt problems and unlock their financial future. Get in touch today and a member of our knowledgeable team will answer any questions you have.

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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Piggy bank

How to Improve Your Credit Score After an IVA

Written by Alex Swindells on . Posted in Debt help, IVA.

An Individual Voluntary Arrangement (IVA) will be on your credit reports for six years after the date that it starts.

Once the IVA has been removed from your credit report you can start rebuilding your credit score. Here is how to improve your credit score after an IVA.

Before you can start rebuilding your finances, you must ensure that you have successfully completed your IVA. When you first enter the IVA, your Insolvency Practitioner will inform you of how many monthly payments you must make. Towards the end of your IVA you may also be asked to remortgage your home and use the money to pay off some of your debts.

When you come to the end of your IVA, your Insolvency Practitioner will check that all payments have been made on time. If there are any missed payments, the IVA may be extended. But if everything is up to date, you just need to make your final payment.

When your IVA is completed, it should be automatically removed from your credit reports and you will also be removed from the insolvency register. Bear in mind that it can take a few months for records to be updated. Check your credit score after a month or two to make sure that the IVA has been marked as completed. If it has not, get in touch with the credit agency and send them a copy of the IVA completion certificate and they will rectify the mistake.

The first step to rebuilding your credit profile is to make sure that all bill payments are made on time and your credit score should slowly start to improve. When possible, you may want to consider borrowing small amounts of unsecured debt, as long as you can repay it on time. This serves as an indicator that you are a reliable borrower. After being on an IVA you will have grown used to living within a budget. It is recommended that any future debt repayments are manageable and the payment sustainable for you to avoid struggling with your finances.

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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

IVA debt help

5 Scenarios Where An IVA Could Be The Best Solution

Written by Alex Swindells on . Posted in Debt help, IVA.

When deciding if an IVA is the right debt solution for you, it is important to consider your personal circumstances and priorities. Different debt solutions bring with them different qualifying criteria and obligations from you, should you enter into them. An IVA works by you making manageable payments towards your debts over a set period (typically 5 years), with any remaining included debt being written off upon completion of the arrangement. 

This guide will take you through some of the scenarios where an IVA could be the best solution.

1. You owe debts to multiple creditors

owing debt to multiple creditors

An IVA is typically suited for people that owe debts to multiple creditors. If you only owe money to a single creditor, you should contact them and ask about a more suitable repayment plan. A single debt is a lot easier to deal with and you can often come to some arrangement with your creditors without having to enter into a formal debt solution like an IVA. 

However, if you have multiple unsecured debts with different creditors, your situation is more complicated. Managing lots of different repayments is difficult and this is often how people lose control of their budget. An IVA will not only help you write off a portion of that debt, but it also allows you to make one single payment, which is then distributed amongst your creditors on your behalf. This makes it far easier to manage debts to multiple creditors.

2. You can afford monthly debt repayments

Before you enter into an IVA, your Insolvency Practitioner will assess your finances. Your income and essential expenditure will be reviewed to create a budget. This will then determine an affordable monthly repayment that you are able to make to all of your debts through the IVA. 

However, it’s important to consider your situation before you enter into an IVA. If you have a reliable source of income and you are confident that you can make the repayments on time each month, it is a good choice. An important factor when considering an IVA is that both you and the Insolvency Practitioner believe that the arrangement will be sustainable.

3. You owe more than £6,000 of unsecured debt

An IVA is designed for people that are unable to pay their unsecured debts within a reasonable timeframe (typically 6 years). If you owe a relatively small amount of money, you may be able to manage the situation with improved budgeting and informal agreements with your creditors. Fees are payable within an IVA, although these form part of your affordable monthly repayment. This means that creditors may not be inclined to agree to an IVA where your budget shows that you could potentially pay them back in full over a similar time period outside of an IVA where fees would not apply.

4. You work in the correct job

person dealing with finances for a job

In most cases, an IVA will not impact on your employment. However, there are some notable exceptions that you should be aware of. Certain jobs do not allow you to have an IVA. These are often jobs that involve handling money or being responsible for finances in some capacity. Examples can include jobs in:

  • Accountancy
  • Other financial services
  • Law

In some cases, jobs in other industries may not allow you to have an IVA. It is important to check your contract, or speak to your employer in whatever industry you are in before entering into an IVA if you are unsure. 

5. You don’t want to directly deal with your creditors

Many people find that one of the most stressful things about being in debt is the constant contact from creditors. If you owe money to a lot of people and you are getting a lot of phone calls and letters demanding payment, it can take a real toll on your life. Often people fail to deal with their debt properly because they don’t want to face all of their creditors and try to negotiate with them.

An IVA is ideal if you are in this situation because you do not have to deal directly with them. Your Insolvency Practitioner will help you draft an offer for your creditors and take it to them on your behalf. If there are any disputes about the offer, they will negotiate with creditors for you. All payments will be made to your Insolvency Practitioner too, and they will distribute them amongst your creditors. 

As soon as you enter into the IVA, you have legal protection and your creditors are no longer allowed to contact you for payment. Your Insolvency Practitioner becomes a liaison between you and your creditors. If dealing with creditors is becoming a major source of stress for you, an IVA could be the solution that you are looking for.

If you need some advice about whether an IVA is right for you, and what other debt solutions are available to you, get in touch with Swift Debt Help today and speak to a member of our expert team.

Request a Debt Assessment

May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

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