Tuesday 16th of February 2010
Individual voluntary arrangements (IVAs) may be undertaken by an increasing number of you who have been caught up in credit card interest rates.
A new survey by Moneyfacts.co.uk shows that credit card rates have reached a 12-year high of an average 18.8 per cent, despite the base rate remaining at the historic low of 0.5 per cent.
Such a rise may have caught you out if you rely on plastic to cover everyday costs. But rather than stick your head in the sand and continue to struggle with what you owe, getting some answers on IVAs could reassure you that there is a way out.
IVAs freeze the interest rates on credit cards. Interest repayments could prove to be a bigger headache than the actual amount you spent and giving you some space could mean you are more able to clear your credit card balances.
But it will take around five years to clear your credit card debts of more than £15,000 through an IVA, so you may want to prepare to tighten your belts in the short term, to strengthen your finances for the long term.
"Other charges such as balance transfer, cash withdrawal and foreign transfer fees also continue to go up, leaving customers paying more across the board," says Michelle Slade, spokesperson for Moneyfacts.co.uk.
Indeed, with lenders coming at you in all directions for charges and fees, you may feel out of control and continue to spend on your credit cards as you believe the situation is at its worst.
Taking the first step to repay what you owe through an IVA could lift the burden off your shoulders of not knowing when the next phone call or letter is coming from your creditors.
An IVA states to lenders that as long as you keep up with your repayments, there should be no need to take further action.
All contact also has to be done through a specialist IVA negotiator.
By Rachel Powell
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVA FAQs could offer answers to those still facing cutbacks
