IVA or Secured Loan Help

KCUndebtify

Hello, I am new to the forum and looking for some advice from people who have been in a similar position. After a prolonged period of severe illness, we have found ourselves unable to carry on paying off our credit card debt. We have never missed a payment, but it is spiralling out of control and we have to stop burying our heads in the sand. We have approached StepChange and been advised to enter into an IVA, at a cost of £575 per month for 6 years. Our only other alternative is to take out a secured loan using the equity in our home, at a cost of £462 over 25 years. I know that from an interest cost point of view, it makes most sense to be debt free in 6 years. I'm just so scared by what impact this will have on our future. Will we ever have access to decent mortgage rates or any loan again if we do take the IVA route? I'm also worried about the fact that the IVA will make things financially extremely tight for those 6 years. The plan had been for my husband's overtime earnings to help with the cost of Christmas etc., but I understand that any additional income will have to go to the creditors under an IVA, which is totally understandable but worrying for a family trying to make ends meet. I don't want to make the wrong decision under a cloud of anxiety and would be so grateful if anybody could share their experiences of life during and after an IVA.  

sourcrates

An IVA is a form of insolvency, similar to a DRO and to Bankruptcy, all will effect your ability to get credit for 6 years.

But it would be the same if you went into debt management, defaulted debts etc, stay on file for 6 years also, so its not really which debt solution you opt for, because any debt solution is going to screw up your credit record for the same amount of time.

After 6 years, the insolvency/defaults drop off your file, and you start again, this applies no matter what solution you choose.

As a homeowner, with what 40k odd of debt I`m assuming, an IVA may be the better part of valour, certainly better than adding it to your mortgage or taking a secured loan, what`s to stop you from running up those unsecured debts again in the future ?

You should be aware of the equity clause in year 5 though, you will be expected to re-mortgage for the benefit of your creditors, if for any reason you can`t do that, then an extra year will be added to the IVA.

Have you considered debt management at all ? much less formal, not bound by any rules, if you can persuade the creditors to stop interest by pushing your health issues, so much the better, budget a payment to each creditor, leave enough to save a good emergency fund, so that further down the line, when your debts have been sold on, you can make full and final settlement offers, thus saving money by paying less than is owed.

Food for thought.

KCUndebtify

Thank you for this - we'll have a closer look at the debt management option. Not sure we'll have enough spare each month to save any decent amount, but I guess that all depends on the level of payment creditors would accept.