IVA vs Debt Consolidation
Choosing the right procedure for you...
This section of the site will discuss the main difference between an IVA and debt consolidation.
The debt support team at Money Advice Direct will discuss the debt consolidation procedure, the IVA and bankruptcy to see what methods is best suited to your case.
Debt consolidation is a strategy sometimes used by consumers to better manage their debt problems. Rather than paying off several separate bills each month, a consumer consolidates his or her debts with a financial institution that will arrange for one lower monthly payment extending over a period of time.
Debt consolidation entails paying off all high interest debt you owe and consolidating it into one loan with lower interest & monthly payment. Debt consolidation means all of your credit cards, household bills, etc. are combined together, less worrying. It allows you to restructure your credit and save money.
There are many differences between an IVA and debt consolidation, the main ones are:
- That assets scutinised with an IV, they are not taken into account with debt consolidation, unless a secured loan is taken out.
- The time periods for each procedure are different.
- Employment status has to be considered before choosing an IVA but under a debt consolidation procedure it is not affected.
There are many implications to be considered with an debt advice procedure such an IVA or debt consolidation and that is why many clients often decide to go bankrupt, take out a debt consolidation loan or a remortgage for their situation. Debt consolidation entails taking out one loan to pay off several other loans and/or accounts. Debt Consolidation is the process of bundling all debt into one loan, usually repayable at a better rate of interest.
If you are facing debt problems we can help you decide whether an IVA or debt consolidation is the best option. Debt consolidation is carried out by Paying off multiple bills and replacing them with one, easy-to-manage payment.
Debt Consolidation vs an IVA – Important facts about the IVA procedure
- An IVA can write up to 75% of debt off, whereas with a debt consolidation loan all the debts have to be paid.
- In an IVA it is easier to get a mortgage, whereas with a debt consolidation loan can actually be a mortgage.
- An IVA will stop all interest on the debt, whereas a debt consolidation is subject to interest.
- The IVA will leave the client debt free after 5 years maximum, whereas debt consolidation can last for a long time dependant on the terms of the loan.
- After an IVA is completed the debts are clear, whereas debt consolidation goes on for a long time.
- In an IVA you can keep your property, unlike debt consolidation where if your home is at risk if a secured loans is defaulted on.
- A debt is better for your career progression whereas it is not affected with debt consolidation.
- If you can do an IVA you can still be a director of a limited company, this is the same with debt consolidation.
- A debt consolidation loan has less social stigma than an IVA.
- A debt consolidation loan is easier on you credit rating than an IVA.
- Taking out a debt consolidation loan will not affect getting a debt consolidation loan , whereas an IVA will cause problems on the credit score.
- An IVA has to be set up by an insolvency practitioner, whereas a debt consolidation loan is organised by an loan company.
Debt Consolidation vs an IVA – The debt consolidation procedure explained
- You make one payment per month instead of many under normal debt payment arrangements.
- You maintain a good credit record if you continue with a debt consolidation loan.
- You paying one interest rate with debt consolidation. An IVA has no interest.
- The lender sometimes requires security for a debt consolidaton loan, therefore the client risks losing their home should they be unable to pay. With an IVA your home is safe as long as you comply with the terms of the IVA.
- The payment term for the consolidation loan (particularly where the debt is secured) may be considerably longer and the overall cost of borrowing may be greater in the long run than an IVA.
Debt Consolidation vs an IVA – The final decision is yours
For clients who are seriously in debt an IVA or debt consolidation procedure may be the only option. Clients must therefore understand the full implications of either procedure. The confidential debt advice offered by Money Advice Direct will help you decide whether an IVA or debt consolidation procedure is the right route to take. Debt consolidation is using the proceeds of a new loan to pay off one or more existing loans. Usually done when the client has trouble meeting their existing obligations and is able to lower their monthly payment with another more favorable loan.
An IVA or debt consolidation procedure will only have been discussed as an option if the debt support unit feels that they are suitable options for you to consider, based on the surplus income you have left once all your essential household costs have been accounted for. An IVA or debt consolidation procedure are designed to give you peace of mind, safe that you will be debt free (subject to terms and conditions) soon and able to make a fresh start. Do not let other debt companies undermine you by suggesting they have a better option.
Debt Consolidation is replacing multiple loans with a single loan that is normally secured on property. This can often reduce your (the borrowers) monthly outgoing interest payments by paying only one loan which is secured on the property sometimes over a longer term. Because the loan is secured, the interest rate will generally be considerably lower.
If you wish to discuss the Individual Voluntary Arrangement (IVA) or debt consolidation procedure and understand how it can help you please complete the following form or telephone freephone 0800 074 6918.
IVA Guide
- What does it mean if my IVA is not approved?
- What are my options if my IVA is not approved?
- My IVA has been approved, what do I do next?
- My IVA has been approved subject to modification – what does this mean?
- How do I make my IVA contributions?
- My IVA proposal included the provision that I had to sell/realise other assets – what do I need to do?
- I am receiving letters and emails from companies offering me a better solution than an IVA - what are these solutions?
- What do I do if my monthly IVA contribution will be late?
- How do I deal with my creditors once I’m in an IVA?
- How do I deal with additional creditors now that the IVA has been approved?
- What happens if I miss an IVA payment?
- The bank has not transferred my IVA payment - what do I do?
- What happens if I do not inform my IVA supervisor that I can’t make the contribution?
- I'm struggling to make the monthly IVA payment what should I do?
- I've received a 'Notice of Breach' from my IVA supervisor - what does this mean?
- What happens if I’ve missed IVA payments or received a notice of breach and there is no solution?
- Is it possible to finish or settle my IVA early?
- How do I settle my IVA early?
- What is the process involved when offering an early IVA settlement?
- Why would I vary the terms of my IVA?
- What does the IVA variation process involve?
- What happens when the IVA variation process has been approved by creditors?
- What happens when the IVA variation process has been rejected by creditors?
- How does an IVA end?
- Will I receive any correspondence when my IVA has completed?
- If one of my debts has been excluded from the IVA, am I liable to pay the debt after the IVA has completed?
- When does a creditor debt claim have to be received by when completing an IVA?
- What happens if any additional debt claims is received during the IVA closure process?
- How do my creditors get their money in an IVA and what are the IVA dividends?
- Does the money in my IVA account earn interest and if so where does that interest go to?
- Do I get a report or certificate stating the IVA has been completed?
- How does an IVA fail?
- What is the effect of IVA failure or an IVA failing?
- What happens after an IVA fails?
- What are the costs of an IVA?
- Who pays for my IVA?
- What is the IVA process?
- Who takes care of my creditors?
- Will an IVA make me debt free?
- How an IVA benefits my creditors
- Lifestyle changes during an IVA
- Advice on living with an IVA
- Will creditors contact me?
- Will I my IVA fail?
- Completing an IVA
- Getting credit after an IVA
- Can an IVA make me debt free?
- How to boost my credit rating after an IVA?
- IVA vs debt management
- IVA vs bankruptcy
- IVA vs debt consolidation
- IVA vs administration orders
- IVA pros and cons
- IVA definition
- What is an IVA?
- Why choose an IVA?
- Who is suitable for an IVA?
- IVA benefits
- IVA stages
- False IVA adverts
- IVA compared to Bankruptcy
- IVA compared to debt management
- IVA compared to debt consolidation
- IVA compared to administration orders
- How the IVA got so popular and famous
- Things you should know and do before you start an IVA
- Will an IVA make creditor phone calls stop?
IVA's
The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.
In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]
What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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DANGER
Due to the tremendous demand for debt consolidation services the United Kingdom is now overloaded with debt management companies that contain misleading information. [more...]