The problems behind IVA loans
One question we're regularly asked about, here at My IVA Adviser, relates to obtaining a loan, or finance, whilst in an active IVA.
Living within the financial constraints of an IVA budget can be difficult as the allowances will limit living expenses to modest levels.
But, nonetheless, it is against the terms and conditions of your IVA to try and obtain credit, be it a loan or finance agreement, whilst your IVA is still active without the express permission of your Insolvency Practitioner (IP).
Their decision as to whether permission should be granted will be determined by the purpose of the loan.
Hire Purchase agreements
The type of loan that will normally meet with your IP's approval will relate to the refinancing of a 'balloon' payment towards the end of a Hire Purchase agreement.
Normally, this scenario will have already been addressed in your IVA proposal and most IPs will agree to allow the HP payments to continue to be used to refinance the remaining balance left unpaid at the end of some HP agreements.
Keeping your IVA on track
If your need for a loan doesn't relate to the refinancing of a balloon payment, then the chances are your IP will refuse you permission.
Your IP will have the opportunity to establish the reason for the loan before they decide, but it would have to be very worthy reason for them to agree.
Underlying problems in your IVA budget
Most IVA budgets are set to the required levels to ensure that all your needs are met before your creditors receive any money from you. The idea being, if you have enough money to pay for all you personal needs, you won't need to use any credit.
This is the basic premise underpinning every IVA and it's why your IVA payments are set to the levels they are, as that's what has been deemed affordable for you.
If you find that midway through your IVA you need to apply for credit, it's quite possible that, through no fault of your own, your IVA payments are no longer affordable for you.
It's possible that the first indication of a budget imbalance might manifest itself as a need for credit.
Whilst a loan might be appear to be the immediate answer, it's possible there should be a re-evaluation of your circumstances instead.
None borrowing options
If your circumstances have changed and you're no longer able to afford your IVA payments, then you should seek advice from your Insolvency Practitioner (IP).
They have the at their discretion the ability to assist you by reducing your IVA payments by up to 15%, to a more affordable level. If a larger reduction is needed, they have the ability to call a Variation Meeting.
By reducing your IVA contributions, you may find the need for credit reduces or is completely removed.
For further advice relating to IVA loans and your obligations under your IVA, we advise you to contact your IP.