Before starting your application for an IVA, you will likely have some concerns and questions: How does an IVA affect my credit score? How long will an IVA stay on my credit file? Is an IVA the best solution for me? Like many of you, one of our former clients had the same concerns.
Meet Mr. P: More than £75k in debt and paying a significant portion of his income each month solely towards loans and credit cards; his financial situation was overwhelming and he needed help. So, in May 2013, he applied for an IVA with us and, six years later, he was completely debt free and already improving his credit rating. We spoke with Mr. P after he completed his IVA to provide a testimonial, not only to our service, but about his experience of the IVA and his journey to debt freedom.
Mr. P’s financial difficulties started in 2008, he was living a lifestyle which was beyond his means, causing him to rack up unsecured debt. This started with credit card transfers which put money straight into his bank and led to him becoming overwhelmed by the amount he had to repay each month. Mr. P explained “I get paid every 4 weeks but by the second week I was already in my overdraft. I had to keep borrowing to pay my debts”
It was this cycle of being paid, paying his debts, and needing to borrow more money that finally pushed him to look for financial help. Like most people in his position, he thought he had a rough idea of his situation. Assuming he owed around £50,000, Mr. P said he “was shocked to see I actually owed over £77,000.” This shows how easy it is for debt to grow and become unmanageable.
A year before seeking help, Mr. P sold his car to help pay towards his debts and he bought a bicycle so he could still get to work. It’s a move he does not regret: “It got me out of paying for parking, fuel, tax and insurance, so this has helped free up some money in my budget.”
Mr. P had done some research into what help would be available to him, so it was no surprise when he was told that an IVA would be the best solution based on his circumstances. When he was told how he could be helped, it was a great relief: “As soon as I was told to no longer make payments towards my debts and that it would be sorted, it was a huge weight off my shoulders”
“IT WAS A HUGE WEIGHT OFF MY SHOULDERS”
Although Mr. P understood what an IVA involved, it didn’t mean that everything was easy. “There were times where I had to get used to my new budget as it was a change from what I had been used to. It sometimes felt restrictive, but I was living on what I could afford.” Mr. P knew that he couldn’t continue with the lifestyle he had become accustomed to, but he was prepared to make these cutbacks.
Mr. P had family outside of the UK which meant that he had to travel quite often. Speaking of our Insolvency Practitioner, Mr. P said, “Janet guided me and helped me budget, so I was able to put money towards my debt and still able to see my family.” If there were any issues with Mr. P making a payment, it was always easy for him to phone in and discuss any difficulties that he had.
Working with his new budget he was able to put a small amount of money away each month. When the time came, he found that he had saved enough money to offer a lump sum towards his debts as a final payment. This brought his IVA to a close sooner than expected.
“THE BEST THING THAT HAS EVER HAPPENED TO ME”
Although Mr. P didn’t become debt free overnight, with the right help he was able to face up to his situation and move forward without the financial burden of his debts. “Being on an IVA has taught me how to handle money and how to budget. It gave me a light at the end of the tunnel. My credit rating has now never been better. It is the best thing that has ever happened to me.”
Mr. P now has a small nest egg set aside and is looking forward to retiring with his family somewhere a lot warmer than the UK.
Could an IVA help me?
Anyone can find themselves in a similar situation to Mr. P and they may not know where to turn, what help is out there for them, or what impact certain solutions may have on their future credit prospects. It’s easy to avoid asking for support with your finances, but look where Mr. P would be without the help of an IVA:
- He would still be in a significant amount of debt, stressed and worried
- He could be receiving threatening letters & calls from his creditors
- His credit file would be negatively impacted for at least 6 years after the last creditor registered a default – and creditors don’t all register defaults at the same time.
- His creditors could have applied for CCJs, applied to take money from his wages, or even employed bailiffs to collect the debts. Impacting his credit file for at least a further 6 years each time.
- He would have struggled to get a mortgage because of his affordability issues.
- He may not be able to budget effectively.
In 2019, 77,962 people started their journey to debt freedom by applying for an IVA just like Mr. P; this is a record number for the UK. You are not alone.
For more information on IVAs, you can visit our information page here.