We have 3 payments left on our IVA and have been approached by a specialist lender, at the request of our IP, with a view to releasing 14500 on a secured loan. Our original paperwork suggested 22500 be released which would give an overall dividend to creditors of 68%. With the fall in house values etc over the last few years this is not achievable.
The loan company want to charge a fee of 3300 and with the payment option of 3-15 years we could end up paying anywhere between 25-45k!! Not surprisingly we are not keen and want to offer an extension of 12months payments which would pay back about 8.5k. Does anyone have any advice on how to go about doing this, and if it is likely to be accepted?
We would not want to fail at this late stage. Many thanks.
It will depend on the wording of your IVA Im afraid, however I fear you will not have the choice
Do you know how much you will be paying each month for the secured loan and how much is your current IVA payment ?
Hi Andy
Monthly payment in IVA IS 693. Payment for secured loan would be 250ish over 15 years paying back around 45k in total or at the other extreme around 650ish over 3 years which would cost us around 25k.
If we carry on the payments for the iva for 18 months that would make about 12.5k for our creditors as opposed to 14k on secured loan. 12 months would be preferable in view of job insecurity etc.
We just want to get it finished as soon as we can.
Hi Lucyl -- on those figures, it is certainly worth proposing this to your creditors. However, they may prefer the lump sum in one hit, which, I assume is enshrined in your original proposal. Discuss seeking a variation with your IP.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
We wouldn't be able to offer a lump sum without a loan, but to pay back either 8.5k over an extra 12 months or 12.5k over 18 months has got to be a better option than only 14.5k with all that interest and fee which is just madness. If we propose the 8.5k and they accept, that's great but if they reject it do we just fail then or should we be able to negotiate? I really dont want to fail so have got to be realistic. Thanks.
It all boils down to pounds and pence Lucyl. The creditors weigh the likely return and also the time scale ... sometimes a lump now is better than slightly more in dribs and drabs ( not what you want to hear in this case).
To be brutal, they won't be overly concerned about the eventual cost to you, but --- if you don't ask you don't get.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
If they say no to our offer, will our IVA fail though or should we be able to go back to the lender if we really must? We don't want to burn our bridges if you know what I mean?
This firstly depends upon the wording of your actual IVA agreement - and secondly your individual circumstances. I am not a fan of clients securing further secured lending at the end of the IVA term, if this is unecessary - but I know there are other IPs who see things differently.
My personal view is that we now have had an IVA Protocol in place for nearly five years, and that if equity cannot be sourced via way of remortgage then an extension of payments through a sixth year will prevail. If you don't have these terms included in your own IVA proposal, then your IP could seek a variation to modify your IVA in line with the proposal. I have successfully done this on many occasions.
Sorry...two more questions before I go to IP:
Do they normally look at just an extra year or would they look at 18m?
What is the likelihood of us failing the IVA if they reject our proposal - can they fail us rather than let us then look at the loan if they dont allow the extension? Really worried- sorry.
If you actually remortgaged and raised the original £22,500 as promised in the IVA your entire mortgage would be switched to adverse rates and you would pay back a lot more than is payable under the secured loan terms. Therefore, the secured loan will work out a lot cheaper than the remortgage you intended to take when you proposed the IVA at the beginning.
It seems a difficult variation to propose given you have the means and equity to repay more to creditors than a twelve month extension.
But the IVA protocol says that they don't have to - so why should people in non-protocol arrangements be penalised and have to pay lengthy secured loans well into the future unecessarily?
I also think why on earth would anyone take on a 5-6 year IVA if they then had to get a secured loan to realise equity? wouldn't it be better to advise them to take the secured loan on in the beginning and use that to offer a lump sum F&F?
The general advice is always to never turn unsecured debt into secured as it puts your home at risk and I am astonished that some professional IP's are basically advocating this shocking advice
