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Can a personal loan be part of an IVA?

You could include a personal loan in an IVA (Individual Voluntary Arrangement) because it's an unsecured debt. Individual Voluntary Arrangements are designed to help you deal with your unsecured debts, which can also include credit cards, store cards and overdrafts.

It can't directly help with secured debts, like your mortgage or utility bills, but it could help you because the payments are tailored to fit around these essential monthly expenses.

Who is eligible for an IVA?

An IVA can only help you with personal loans - and your other unsecured debts - if you're eligible.

To be eligible, you must be seriously struggling with your unsecured debt repayments every month. You must be unable to clear your unsecured debts in full in any realistic amount of time. An IVA can only go ahead if enough of your lenders agree, and they are only likely to agree if they can see that it's the best way for you to repay your unsecured debts.

Though there's no way you can afford your unsecured debt repayments as they stand, you should still have a steady income that would allow you to make lower payments for (on average) five years.

Finally, you'd need to be a resident of England, Wales or Northern Ireland; if you live in Scotland, you might be able to enter a Trust Deed.

If you're not sure whether you're eligible for an IVA, fill out our fast-track call back form for advice from an IVA professional.

How can an IVA help?

An IVA can help you with your unsecured debts by lowering your monthly repayments to a level that you can afford. This will be calculated by taking all your essential monthly expenses into account - like your mortgage payment - and fitting your IVA payments around them.

You would typically make these new, more manageable monthly repayments into your IVA for five years. Interest and charges on the included debts will be frozen. You'll also be protected against legal action from your unsecured lenders - so they won't be able to take you to court, petition for your bankruptcy or ask for higher payments. Upon completion of your IVA (as long as you've stuck to your payments as agreed), any remaining unsecured debt will be written off.

You'll also benefit from advice and guidance from an Insolvency Practitioner - who will arrange and oversee your IVA all the way through. They will deal with negotiations with your lenders for you.

If you're a homeowner, you should be able to stay in your home - which might not be possible if you enter bankruptcy. Bear in mind, however, that you will probably be asked to release some equity in your home during the final year of your IVA.

If you'd like to know more about IVAs, click here.

An IVA will also damage your credit rating for six years. This will make further borrowing difficult during this time, but it's worth considering that your credit rating would almost certainly have been damaged anyway if you'd continued struggling with your original repayments without getting any professional help.

By Matthew Plant.

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Subject to eligibility and acceptance. Fees Payable. Debt write off applies to unsecured debts only and on completion of an IVA, alternative solutions may be offered. If your IVA fails, it could lead to Bankruptcy. Your ability to obtain credit will be affected for at least 6 years. Homeowners may be required to release the equity in their property.