What can I do to help myself afford an IVA?

All IVAs should start on a firm basis of affordability and making sure your IVA payments are affordable is critical if you want to give your IVA the very best chances of reaching a successful conclusion.

But, whilst it pays to ensure you're comfortable with your IVA payments before you begin, there's also another aspect to your IVA payment that needs to be taken into account. Your IVA's minimum payment threshold.

IVA Minimum Payment Threshold

The minimum payment threshold of an IVA is the minimum repayment level creditors will accept for any given debt level.

It represents a minimum threshold below which creditors might reject an IVA due to insufficient financial returns.

There is a direct relationship between the size of the minimum payment and the total debt owed. The more money owed, the higher the minimum payment will be.

Debt slider tool

On the side of every page of the site we have our 'Debt Slider' tool.

Beneath the slider are a three numbers that change as the slider is moved. The middle number represents the minimum payment that creditors would expect to receive for that given debt level.

This is a very important number, because if you can't afford to pay the amount related to your own debt level, the IVA option loses its suitability for you.

Take a look at the IVA slider and see what you'd be expected to pay as a minimum payment into an IVA.

Can't afford the minimum payment?

If you find the minimum payment is higher than you can afford to pay, you'll need to consider what actions you can take to make the minimum payment affordable for you.

Here are some things you may wish to consider to help you afford an IVA.

  • Increase your income:
    The first thing you might consider is whether you are able to increase your income. This may seem obvious, but it's surprising how many people overlook this option. If the increase isn't too great, you may be able to make the difference through voluntary overtime, or a second job.
  • Reduce your expenditure:
    If earning extra money isn't an option, you may opt to try and reduce your expenditure costs instead. Smokers might consider cutting down their habit, or drivers might be more sparing with unnecessary journeys. Small savings throughout your expenditure will soon accumulate, and may just be enough to tip the balance.
  • Take in a lodger:
    You could consider taking in a lodger. This is an excellent way of generating extra funds and, up to certain amounts, is exempt from tax. Similarly if you have offspring who work but still live at home, asking for a small contribution towards board and lodgings may help enormously.
  • Terminate your car finance:
    If you're buying your car on finance, it's sometimes possible to terminate the finance agreement, then use the savings you make by removing the finance payments to enhance your ability to afford the IVA. Furthermore, if the car was in negative equity, you can use the IVA to mop up any shortfall created by the repossession and forced sale.
  • Third party funds:
    It's acceptable for a third party to assist you in paying your IVA. If you are unable to afford the minimum but have access to third party funds, creditors will accept their inclusion until such time that they are no longer required.
  • Low start IVA:
    Sometimes it's possible to enter an IVA with a low starting payment, which rises when an expected financial improvement arrives. This could be the completion of an HP agreement. The payments being used to pay for the HP agreement would switch to the IVA and, so long as the average over the IVA term achieves the minimum, the IVA will still work.
  • Switch to interest only mortgage:
    If you own your own home you could consider changing your mortgage type from a Capital and Repayment mortgage to an Interest Only mortgage. This will significantly reduce you mortgage payments as the element of capital being repaid is removed. However, professional advise should be sought from a mortgage adviser before you make any changes.

Each of these actions would release money into a budget, and improve the affordability of an IVA.

Professional Advice

The team behind My IVA Adviser are experts at helping people explore the IVA solution.

As part of that exploration, we undertake a full financial assessment to ensure the IVA payments are affordable.

If you're struggling to afford your IVA minimum payment and think you'd benefit from a financial assessment, then simply call us on 0800 088 7503 and talk to an adviser.

Alternatively, complete this form and one of our advisers will call you at your preferred time.

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In accordance with the Financial Conduct Authority's guidance, please follow this link if you would like to read a free guide about In Debt - Dealing with your creditors
To find out more about managing your money and getting free debt advice, visit Money Advice Service , an independent service set up to help people manage their money.

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