Wednesday 6th of January 2010
The latest Credit Action report reveals that the average household debt in the UK stands at £9,016 - not including mortgages - a figure which an individual voluntary arrangement (IVA) could eventually cut down.
When the average is based on the number of households which have some form of an unsecured loan, this amount rises to £18,784. IVAs can be used to repay unsecured debts of more than £15,000.
High unsecured debt levels can result in interest to quickly accrue, making it even more difficult to meet repayments.
An IVA can answer this difficulty be freezing the interest rate on unsecured debt, making repayments more manageable for struggling Britons.
The figures from Credit Action also show that the average interest forked out by UK households on their debt is £2,621 each year.
Using an IVA to freeze interest repayments could be an attractive route for some people, who may prefer spending a few years repaying what they owe through an IVA, rather than the quicker option of bankruptcy, which can have more serious consequences.
Being declared bankrupt can result in a family home being repossessed. But so long as repayments under an IVA are met, a property should remain secure from court action.
By Kim Parsons
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- 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 questions could come just in time for credit card addicts
