The debt management industry has a few problems. Without doubt, one of the biggest is not disclosing all of the details on the debt products on offer. Sure, the good points of a solution are plastered around for all to see, but that’s only half the story. The downsides to a solution are conveniently given in tiny writing at the bottom of a page, or worse not at all.
Of course we want to shout about the good points. After all, there are many great features to debt solutions that can help you gain control of your finances. That said, we want you to have a complete picture so you know what is involved.
Write off up to 90% of your debt
The key words here are ‘up to’. Yes, people have written off 90% of their debt on an IVA; however, this is by no means the norm. The amount of debt you write off will come down to your individual circumstances.
In some circumstances, you might not write off debt at all. This could be due to a large windfall such as inheritance or a lottery win (fingers crossed). Or your circumstances may improve such as a promotion at work.
This is something that can be looked at in more detail on a call with an adviser.If it looks likely your circumstances are set to improve over the next few years it’s unlikely a debt adviser would recommend and IVA. Ultimately, they only want to recommend an IVA to you if it’s likely you will write off a good portion of your debt.
Freeze interest and charges
There’s not much to explain here. If your IVA is accepted, the debts included will have the interest and charges frozen. However, keep in mind if your IVA fails it’s likely your lenders will start the interest and charges again, and in some cases they might add on interest and charges for the months they missed out on.
That’s why it’s important to have a stable income when starting an IVA. If your IVA fails in some circumstances it can lead to bankruptcy.
Affordable monthly payments
Your payments are based on your income and outgoings. That being said, there are restrictions on your expenditure. For example, you couldn’t say you spend several hundred pounds per month on socialising. No one is saying you can’t spend your money on what you like, it’s just that you’d have to budget accordingly, perhaps cutting back in other areas.
The amounts you’re allowed for your outgoings are based on your house size (how many adults and children). There are certain circumstances (say someone in your household is diabetic) where it might be possible to agree to a higher amount than is normally allowed. Your IVA provider will negotiate this with your lenders.
You should keep two things in mind
- Your new monthly payments to your debt solution will be lower than your current combined debt repayments to your lenders.
- If you aren’t happy with the way your income and outgoings have been calculated, you are not obliged to start the debt solution.
It’s right to say that an IVA is government legislation. But isn’t it obvious to point out that it’s government legislation? Wouldn’t it be a little like saying use government legislation to buy a house? Factually it’s accurate but it seems pointless.
So why do debt companies insist on plastering this all over their ads and webpages? The answer is obvious to anyone familiar with the debt industry. If these private sector companies can come across as if they are a government body, they set to gain unearned trust from visitors. That trust means the visitors are more likely to become a customer, in the false belief they are dealing with a trustworthy company.
You might be wondering why I’m only talking about IVAs. There are other dent solutions, so why concentrate on this one? Well, IVAs make more money for debt companies than the other debt solutions. For that reason there’s more mis-information out there about them, and therefore much more to point out about this debt solution compared to the other ones.