Can I pay my IVA off early? All you need to know!

How long does an IVA last?

Typically, an IVA will last a total of five years from the date of approval but may be extended by 12 months if you miss a monthly payment or have a payment break at any point during your arrangement.

This may sound like a long time to be making monthly IVA payments towards your unpaid debt but compared to other debt solutions, the remaining balance on your debt will be written off by your creditors and you will be declared debt-free when your IVA ends.

When you enter into an IVA, it will be also noted on your credit file for a total of six years from the date it was approved meaning, for most people, their IVA will remain on their credit file for another year after they have been discharged from their arrangement.

If you have the funds to do so, it may be possible to repay your debt through a lump sum payment (also known as a full and final settlement) which usually lasts around six months.

This can help you become debt-free quicker but your IVA will still remain on your credit score for six years from the date it was approved.

Can I settle my IVA before five years?

Whilst most IVAs last five years, there is no minimum length of time that an IVA must last and if you receive an unexpected sum of money at any point during your arrangement, you may be able to put it towards your IVA to pay it off before five years.

The most common reason for settling an IVA early is receiving a financial gift from a friend or family member.

When this happens, you must provide proof that the person who gifted the money is aware it will go towards paying off your IVA.

If you receive a windfall payment or inheritance, on the other hand, this must go towards your IVA but will usually not be enough to let you settle your IVA early and just mean that a bigger portion of your debt has been repaid. This is because a windfall or inheritance is considered an asset.

The only exception to this rule is if the amount of money is so large that it covers your remaining debt level plus added interest.

However, it is worth remembering that every IVA is different and it is ultimately up to your creditors to decide whether to accept your lump sum payment to allow you to settle your IVA early.

IVA is debt solution which allows you to write off up to 81% of unsecured debt with government legislation

How do I settle my IVA early?

If you want to settle your IVA early, there are a few steps you must follow:

Early settlement offer

Before you can settle your IVA early, you must contact your Insolvency Practitioner (IP) as soon as possible with an offer of an early settlement.

This is a sum of money that is as close to your remaining debt level as possible that your creditors must agree on to allow you to leave your IVA early.

Variation meeting

If your IP is happy with the amount proposed and believes your credits will accept the offer, they will arrange a variation meeting to give your creditors an opportunity to discuss changes to the original terms of your arrangement. Like a creditors meeting, 75% of your creditors must agree to your early settlement offer for it to be accepted.

Final decision

When 75% of your creditors accept your early payment offer, your IVA will be closed and you will no longer be required to make monthly repayments towards your debt.

If your creditors reject your early settlement offer, you must continue to make monthly payments towards your IVA as normal.

Why choose Creditfix?

• Write off unsecured debts over £6,000
• Stop interest and charges soaring
• Reduced payments from £110 per month

Trustpilot

Check if you qualify

How much money do I need to settle my IVA early?

The amount of money you need to settle your IVA early depends on how far into your arrangement you are and how much of your debt remains unpaid. This is why most financial experts recommend offering an amount that is as close to your remaining debt level as possible.

For example, if you are paying £200 a month towards your IVA and still have 24 months left of your arrangement, you must offer an amount that is as close to £4,800 (24 x £200) as possible. This will reassure your creditors that they are not losing out by accepting your early settlement offer and boost your chances of being accepted.

Can I settle my IVA early with a loan?

Whilst not always recommended, it may be possible to get a loan to settle your IVA early. This is known as an IVA early settlement loan.

However, this is usually only offered if you are more than halfway through your arrangement and will only give you enough credit to pay off your IVA early meaning the loan will still need to be repaid.

Before you agree to an IVA early settlement loan, you must talk to your IP first who will provide expert debt advice and let you know whether it is the right decision for your current financial situation.

It may also be possible to settle your IVA early by remortgaging your home but you will typically be asked to remortgage your home around six months before your IVA comes to an end anyway.

Should I settle my IVA early?

Whilst settling your IVA early can mean no more monthly payments and allow you to get a head-start on rebuilding your finances, there are a few things you must consider.

For example, your IVA will still be listed on your credit report for six years and lower your credit score which can make it difficult, if not impossible, to get further credit.

This means that, whilst you are technically debt-free, you will still be limited in the financial decisions you can make.

If you’re unsure whether to settle your IVA early or continue making monthly payments, your IP should be able to answer any questions you have and let you know whether they think an early settlement is something you should consider.