How long will an IVA affect my credit rating?

From the date your IVA (Individual Voluntary Arrangement) starts, it will affect your credit rating for six years. As IVAs usually last around five years, this means you may continue to be affected for around a year after your IVA ends. During this time you'll probably find it more difficult and/or more expensive to obtain further credit, such as personal loans, credit cards - or even a bank account with an overdraft facility.

This may seem like a big drawback - and it can be - but it's worth bearing in mind that, if you had carried on struggling with your debts, your credit rating would've been damaged anyway. That's because IVAs are only an option for people who are struggling with serious debt problems.

How else will an IVA affect me?

As well as affecting your credit rating, taking part in an IVA may also mean that you have to release some equity in your home - although you will not be asked to sell your home, as could happen if you entered bankruptcy.

Is an IVA worth it?

As we've seen, there are certainly some disadvantages to taking part in an IVA. But what about the advantages?

Firstly, if you can't see a way of clearing your unsecured debts in full in a realistic amount of time, an IVA could help make your debts easier to manage - and more affordable.

A qualified Insolvency Practitioner will help you to go through your budget and work out how much you can actually afford to put towards your debts every month. These new payments will then be proposed to your lenders, and if enough of them agree then your IVA will go ahead. If your lenders do not agree, a different debt solution may be more suitable for you. Click here to read about your options.

An IVA will offer you legal protection from your unsecured lenders and interest and charges on your debts will be frozen too. On top of this, your Insolvency Practice will deal with those lenders for you and regularly review your IVA to make sure your payments are still affordable. If you'd like to know more about how your Insolvency Practice could help you through an IVA, click here.

And, of course, when your IVA is complete (usually after five years) any unsecured debt remaining in your IVA will be written off - as long as you've stuck to your payments as agreed.

So although an IVA is a serious, legally binding solution with some drawbacks, it could help you to become free of your problem debts.

If you'd like to talk to an IVA professional, or apply for an IVA, fill out the form on this page.

By Helen Gradwell.