IVA Early Settlement Loans: can you leave your IVA early?

Here’s the story of someone you know. It might even be you – what if it were you? Imagine for a moment if you fell upon hard times, borrowed for the stuff you needed and couldn’t do without and maybe a few of the things you might have been able to sacrifice (if only you’d known the direction your finances might take…) A payday loan or two, several credit cards – it seems like a clever juggling act until a few things go wrong.

Just imagine a year later, a couple of financial shocks down the line (a pandemic perhaps?) and your outgoings have become much bigger than your means to deal with them. No matter what clever juggling you perform with those credit cards, you can’t avoid maxing them out and you’ve defaulted on several accounts because you simply couldn’t manage the repayments. These accounts are demanding cash and it seems as if this is a mess you can’t cope with in any workable way. Your credit file is a bloodbath, there’s possibly a CCJ against you and debt collection agencies are pursuing you without mercy. There’s illness in the family, you haven’t slept a wink for what seems like weeks and the whole situation is taking a vicious toll on your own mental health.

What on earth are you going to do? You’ve exhausted the goodwill of friends and relations you trust and don’t want anyone else to know about the whole thing if you can avoid it. You feel humiliation, shame, regret (ah, those impulse purchases of the last two years!) and sheer desperation. It seems there is no way to avoid the bailiffs because no one will give you a break.

IVA lifeline

When you’re just at your wits’ end, considering all sorts of damaging options, you take some impartial advice from a charity such as Step Change or the Citizen’s Advice Bureau. You realise to your tremendous relief that there’s an arrangement called an IVA (Individual Voluntary Arrangement) which means you can avoid bankruptcy. You can see this would be a brilliant option for you at the moment and sign up for a 5-year arrangement, where you give a percentage of the total back to your creditors (through the IVA firm) in monthly payments and they give you a welcome breathing space and (relief!) an agreement not to pursue you for your debts. The stress and distress of all that debt has been lifted and you feel safe for the first time in years. Everything is going to be fine.

Grown out of your IVA

Fast forward again, say another three years and you might have become a bit weary of the stringent restrictions of the IVA. There’s no doubt it is strict (the theory is that you’ll learn better saving habits) and so you have only a very tiny amount of cash which can be described as disposable income every month. Sure, it has taught you self-discipline and you’ve kept up with your IVA payments religiously, but this life-saving arrangement may have also slightly infantilised your budgeting, as you can make few financial choices on your own. Any extra spending due to nasty surprises (washing machine, car repairs, replacing a leaky boiler etc) has to be individually negotiated and requested from your IVA firm. And any extra money which comes in – for example: from bonuses, overtime or a pay rise, disappears into the IVA without reducing the total to be paid. This is particularly demotivating, decreasing your motivation to do better financially, move on in life and achieve greater things. Your income is assessed every year and if it rises, your payments every month will naturally increase too. Speaking of which, you’d love to apply for a better job with a bigger salary in a different area of work, but the job you want has strict financial solvency criteria and you know your IVA will be a deal-breaker. You’re stuck. Not at risk, not living in fear and better off than you were in the depths of financial despair three years ago, but stuck nevertheless. You’ve simply grown out of your IVA.

What if you could choose to leave your IVA?

You might feel like you’re ready to move on, but you’ve signed up (for typically 5 years) and that seems to be it. But listen up, because this is not your only option and you still have a choice.

There are very few companies who offer a loan to people in an IVA to allow them to exit their IVA early. It’s a relatively new concept and sometimes people are fearful of ever taking out credit of any sort again. But credit is the bedrock of most of our financial lives and responsibly delivered, affordable credit is a good thing for most people, provided it is also borrowed and managed responsibly.

Put simply, if you want to move on from your IVA and you’ve proved you’re ready to do so by making your IVA payments responsibly, you may be eligible for a Sprout IVA Early Settlement Loan. If you’ve reached month 34 in your IVA, have kept up with your payments and missed no more than one in the past 12 months; if you pass Sprout’s income and expenditure affordability checks, you may be eligible to apply. While your IVA may have been a lifeline at the time you entered into it, circumstances and people change – for the better we hope! We believe the financial products you use should be able to change over time to reflect your needs and help you grow.

Valerie Nicholson

If you are thinking of exiting your IVA early and are interested in hearing more about the Sprout IVA Early Settlement Loan, phone us at Sprout Loans on 033 3939 9393 and we’ll be happy to answer any questions you have.

REPRESENTATIVE EXAMPLE:

Borrowing £2,000 over 24 months at a Representative Annual Percentage Rate (APR) of 39.9% with an interest rate of 39.9% per year will mean fixed monthly repayments of £116.15 and a total amount payable of £2,787.50