Let’s start by explaining exactly what IVAs and Debt Management Plans are. We will give some pros and cons of choosing either option to get back some control over your finances.
IVA – Individual Voluntary Agreement
This is a much more formal approach when compared to a DMP and involves a legally binding agreement negotiated by an insolvency practitioner. A typical IVA is used to pay back unsecured loans over a 5year period in most cases.
Pros of an IVA
- You and your assets are protected by the IVA once it has been negotiated
- One simple payment for all your creditors and usually at a much lower rate than you were paying
- A clear path back to financial stability and much less stress as you can no longer be hounded by creditors
Cons of an IVA
- While the agreement is in place, you are unlikely to be able to secure any further debt (which is often a good thing anyway)
Debt Management Plan
This is an agreement you or an agency makes with the creditor you owe money to take care of the outstanding financial commitment you have with them.
Pros of a DMP
- Gives you a clear way forward and can be individualised to each creditor depending on how many creditors you currently owe.
- Can achieve a lower interest rate and longer repayment terms to ease the financial burden you might currently be feeling.
Cons of a DMP
- Will generally have a negative affect on your credit score
- If you have multiple creditors. Numerous Debt Management Plans with each creditor can become confusing and increase your financial stress. Several payments come out frequently to abide by each plan
A Debt Management Plan is a great option if you have just a single creditor whom you owe money to and are unable to meet the current repayment requirements. If you are able to negotiate this on behalf of yourself, it could be a viable option for you.
If you have several creditors hounding you for repayments however, an IVA might be a better solution to simplify and destress your life.
So whilst both options have their pros and cons. For peace of mind, and to take away a lot of the stress that the burden of debt brings, an IVA is a solution that ticks a lot of boxes and allows you to start rebuilding your life and planning for the future.
Contact us at Your IVA – we can help.