For many families in the UK already struggling with personal finance problems, Christmas 2009 brought with it added stress on how to afford the extra expenses of the season. While people around the nation woke up to presents from loved ones on Christmas day, almost three million Britons woke up still trying to pay off their debt from Christmas 2008.
In fact, a new report released in January 2010 by The Financial Inclusion Centre found that the average Briton borrowed £288 from a ‘loan shark’ in order to pay the costs of Christmas 2009. Alarmingly, due to the high interest rates of loan sharks, it’s estimated the average borrower will end up paying an extortionate £820 for their loan – almost three times more than their original loan.
However, the New Year presents an opportunity for many to regain control over their finances following the costly festive season. For those who had their Christmas overshadowed by debt problems, there are many solutions available. For those with small amounts of debt, strict budgeting, cutting costs, increasing income and debt advice may be all that is needed to find your way out of the red. However, for more serious debt problems, solutions such as an Individual Voluntary Arrangement (IVA) may be needed.
What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a legally binding monthly payment plan that is agreed between a creditor and debtor. The payments typically last for five years, during which the interest is paused on your debt and your monthly payment figure is calculated based on what you can realistically afford to pay. For many debtors, it offers a way to reduce monthly payments while also removing the pressure of paying multiple creditors.
During an IVA, your creditors are legally prevented from contact you requesting payments, and as long as you keep up with the payments, you can potentially write off a portion of your debt following completion of the plan.
Are you eligible for an IVA?
An Individual Voluntary Arrangement isn’t for everyone. To be eligible for you should owe over £15,000 to three or more creditors and will need to be struggling to make your payments. As you’ll be required to adhere to a monthly payment plan, you’ll also have to be in regular employment with a steady income.
Debt solutions should only be chosen after careful consideration to your personal and financial situation. Those considering an IVA or any other debt solution, are advised to seek free debt help before deciding on what action to take.
