Is an IVA a good way to deal with payday loan debt?

An IVA (Individual Voluntary Arrangement) could help you deal with payday loan debt, but only if your situation means it's the right approach for you.

To qualify for an IVA you must be seriously struggling to pay your unsecured debts back, so you can only use an IVA to tackle payday loan debt if you can no longer afford to meet the payments to your payday loan and your other unsecured debts each month, and don't think you can repay the money you owe in full.

Enough of your unsecured lenders must agree to your IVA for it to go ahead - and they won't agree if they think you can repay more of your debts in another way. Keep in mind that you must be able to commit to lower monthly payments.

Click here to find out if you could qualify for an IVA.

How can an IVA help?

If you need a bit of money to tide you over until payday, a payday loan may be a convenient way to do this. Problems can start to arise, however, if you don't pay it back on time and interest starts mounting up. Some people get caught in a vicious circle where they keep getting new payday loans to pay for old ones.

An IVA can help by lowering your monthly debt repayments to a level that you can afford, and can stick to throughout your debt solution. Your mortgage/rent, bills, food and petrol costs will be taken into account, so your unsecured debt repayments shouldn't get in the way of these priority payments. You will basically tackle your payday loan debt (and other unsecured debt) at a pace you can afford - and after five years (in most cases) any remaining debt included in your IVA will be written off, as long as everything has gone to plan.

Some people struggle with the interest charged on payday loans, as it can really add up. If you enter an IVA, your lenders will freeze interest on your unsecured debts.

It can also be difficult if your unsecured lenders are all contacting you about your debts. During an IVA, you will be protected against legal action from your lenders - as long as you stick to your side of the agreement, they won't be able to ask you for higher payments, take you to court, or try to make you bankrupt.

There's more information about IVAs on our FAQ page.

Are there any disadvantages?

An IVA will stay on your credit rating for six years, so you will probably find it hard to get further credit during this time.

If you're a homeowner, you need to consider that it's likely you will have to release some equity in your home during your IVA.

Although it may be able to help you with your debt problems, starting an IVA is a big decision - it's a legally binding agreement. If you think you could repay your unsecured debts in full, but you're still struggling with your monthly payments, debt management might be more suitable. If you're not sure what is right for you, fill in our call back form and a debt adviser will be in touch with some advice.

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