We have a debt of around £26000 with 3 different creditors and although we are meeting the payments each month living is becoming more and more difficult to the point we know we will end up in trouble soon. My Dad has suggested we take out a personal loan for this amount to consolidate it and have 1 lower monthly payment over a longer time however my husband is worried it will just spiral again and we'd be better with an IVA. We have a young son and want to ensure we make the correct decision now so we can have a better future. Opinions please?
Your dad is correct in that a personal loan may help you, provided the interest rate is not too high and you have a payment every month that you can afford. However, in our experience we tend to find that taking further credit out can actually make your situation worse and I think that is what your husband is referring to with regards to the debt spiralling out of control. Essentially an IVA is designed to enable you to pay your creditors back each month with a single monthly payment that you can afford. The IVA may also bring you stability to your finances because you know you will be debt free once your IVA is completed which means you can plan for the future without the uncertainty that you may currently have.
An IVA or a loan are not the only choices and your best approach is to research your options thoroughly to ensure that you make the right choice for your circumstances.
Good luck!
Last edited by Gareth on Thu Oct 25, 2012 10:24 am, edited 1 time in total.
Whether taking out a personal loan or an IVA the important thing is to make sure you have budgeted and can stick to that budget.
I have been in this situation many times and still never managed to budget properly, resulting in a time where I just could not afford to live without the means of further credit.
Many on here will agree, entering into an IVA is a contractual agreement and makes you budget because you can not just use credit to get by anymore.
Hi Lucy, I agree with a lot of the comments on here but you will have to consider everything very carefully.
An IVA is a very big commitment and as you can see from the forum they are not without their problems, a consolidation loan will hopefully give you a lower monthly payment which is more manageable.
Have you spoken with an IP or debt counsellor, most of us offer a free initial consultation to go through everything with you. The IPs on here will give you the correct advice and will not lead you down a wrong path.
It may be worth you consulting with an IP with details of your income and expenditure and any assets. I was approached on Saturday by a forum member to do an IVA and I advised him that this was not the correct route for him.
My advice would be to speak to someone sooner rather than later.
If you are fortunate enough to still have a choice, and can get a decent rate loan - do it over going into an IVA, and don't take out further credit.
IVAs sound tempting, as a lot of debt can get written off. But you must consider that it is a form of insolvency: Factor in the effect your credit rating over 6 Years (does not just stop you getting credit, but even a bank account with a debit card and a cheque book may be difficult to obtain), equity release clause if applicable, and your personal details appearing on the insolvency register. Also, every spare £ of your disposable income will initially be your monthly payment - little or allowance is made for luxuries such as Xmas, Birthdays, Holidays etc.
Suffice to say an IVA is not an easy option, and should not be entered in to flippantly.
I had no choice, as I could not afford to repay my creditors and make a dent in my debt. For me it was IVA, DMP, or bankruptcy, and the IVA was the lesser of the 3 evils.
Seek some professional financial advice for sure, and work out what will be best for your situation. Good Luck.
My opinions are just that: Based on my experience and being a self-employed IVA customer.
Hmm, you see I wouldn't recommend a consolidation loan of that amount at all, a) because it is unlikely you will be offered one unsecured so securing it on your house adds risk and b) it is highly likely you will just continue to run up debt and then further down the line find yourself in a similar situation, how do I know this? well how many of us that are in IVA's have taken consolidation loans out in the past with a view to drawing a line under the debt thing and sorting ourselves out and still ended up in more debt?
If we hadn't taken out consolidation loans in the past we would now have a £20k mortgage instead of a £150k one.
I'm not saying an IVA is the right solution for your either, I can't advise that without knowing more details anyway, but a consolidation loan doesn't in itself teach you how to live within your means, this is the key to getting rid of debt and staying out of it
The thing is we've never missed a payment nor are we behind on any. It's just that we've been reliant on our overdraft and credit cards to live whilst we waited for a pay rise that never surfaced and currently nor will it. Next month our payments will take us over our overdraft limit which will then have a knock on affect on the following months. When you look at our outgoings compared to our in comings we're short of about £150 due to the credit card payments. We're currently living in a 1 bedroom flat with a 2 year old which isn't ideal and I'm worried that an IVA will ruin our chances of ever being able to move or extend our family. My husband has taken on a 2nd job which will help our shortfall but it's the next few months we need to get through which we won't if we're forever chasing our tails. An adviser we spoke to said an IVA would work for us but I can't say I'm convinced as from my research it seems an IVA is more suited to people who are in a worse situation then we're in. It's all so confusing. Where's the fairy Godmother when we need her?
Lucy, Speak to as many IPs and friends on this forum as you can.
As advised by me and UpToMyNeckInIt and IVA is a huge committment. But it is a very good debt solution for many people but it does depend upon your circumstances. You need to get it right as you have future plans for you and your family.
You're absolutely right though, your debts will continue to increase if you don't take some sort of action. I am available to talk to you if you want some advice. Sam
Hi we were in the same situation as you with around the same month of debt and 3 children and we were struggling to make payments on 2 loans and 2 maxed out credit cards. We spoke about debt comsoliadtion but it would have taken 9 years to pay off. The IVA was a difficult decision and we havent told any of our friends of our financial sitiuation. We are nearing half way, and although its hard some months with big payments eg car services and repair etc, most of the time it is a relief that we took this path. good luck xxx
We've not in IVA at the moment Anap it's something we're considering. Sam I may contact you tomorrow. I would rather my husband be here with me as I don't understand a lot of the jargon!!
Lots of good advice from others of varying financial situations.
My husband and I owe £63 apx, and around 75% of our debt was consolidation from loans we took out in previous relationships.
We started a debt management plan which we did for 12 months when we were maxing overdrafts etc, but found that this was getting us nowhere fast.
We found this forum after talking to a family friend who had entered into a dmp then an iva after having financial issues for years, and we found all on here to be a great help in making us decide what to do.
We did look at the consolidation for the amount we owe, but even though we were making our payments with no issues, we were told that the chances of getting more credit, even to cover the amount owing, would be difficult.
Only you can decide what to do, but I know that after the stress, worry and fear about losing our home that our family had worked hard to make our own, we made the right choice for us - iva.
As mentioned above, you have made the first step by admitting that you need financial support and by speaking to experienced IP's, they will help you discuss your options.
I wish you luck !
Started IVA 27th Feb 2012 - Due to complete 27th Jan 2018 !!
Full & Final submitted and accepted 30th March 2015, paid 10th April 2015 - 3 yrs 1 month into IVA
Completion Certificate received- 30th April 2015!!
Hi Lucy. It`s a very difficult decision - giving up your credit rating with a young family and with plans to move on.
But having asked for my opinion ,first of all I`d say we are in our 50`s and our kids have "grown up".
Then I would say for years we did the consolidation route, several times, but in the end we went into an IVA when things went out of control. In hindsight we should have tackled our money problems much earlier.
So I`d say well done for for predicting what could be ahead. You need advice off a professional though - things might be easier to sort out at this stage.
