You will not pay your IVA any faster by simply increasing your payments. Your creditors simply get back more of the debt they were originally owed.
Included in this article:
Will you pay your IVA faster if you increase the payments?
Can you use a bonus or overtime to pay your IVA faster?
What happens if you come into money like inheritance?
Is thee any way to pay your IVA faster?
Will you pay your IVA faster if you increase your payments?
Increasing your payments does not pay your IVA faster. If you do this, the result will be simply that the amount you pay into the Arrangement goes up. In other words, you just end up paying back more of your original debt.
This happens because your payments are not fixed. They increase if your financial situation improves (for example, if your income goes up or specific living expenses fall).
The terms and conditions of your agreement actually state that if you can afford to increase your payment, you have to do so.
Because of this situation, you have little to gain from cutting back on your living expenses to try and pay your IVA faster. It is far better to hold back any funds you are able to save so they are available to use in case of a financial emergency.
Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.
Can you use a bonus or overtime to pay your IVA faster?
You can’t pay your IVA faster by increasing the payments. But what happens if you can pay more in any particular month because you earn extra in the form of a bonus or overtime?
The rule with overtime or bonuses is that you can keep the extra you earn up to 10% of your normal take home amount. You have to pay 50% of anything over this to your IVA.
However, if you pay additional money into your IVA like this, you do not pay it faster. The extra money is simply used to increase the amount you repay overall. Your remaining number of payments stays exactly the same.
If you get a bonus or earn over tie in any particular month, you must tell your IVA company straight away. If you don’t you could be in breach of your agreement and put it at risk of failing.
What happens if you come into money like inheritance?
If you receive any unexpected lump sum of money in an IVA, this is called a windfall. It could be an inheritance or compensation payment or a lottery win. It could also be money you receive after the sale of a house.
Normally, if the amount received is greater than £500, you have to pay all of it into the Arrangement.
Whether or not your IVA is paid faster as a result depends on the size of the windfall. This is because there has to be enough money to cover the following:
– 100% of the debt you originally owed (less what you have already paid in)
– The IVA company fees.
– Interest on the original debt owed at 8% per year (in some cases)
Your IVA will be completed if your windfall is large enough to cover all of this. If not, it does not pay your IVA faster. You still have to continue paying your monthly payments.
Is there any way to pay your IVA faster?
Unless you receive a windfall large enough to pay back everything (as described above), the only way to pay your IVA faster is to settle with a third party lump sum.
The money has to come from a third party. This is because they don’t have to pay their money into the Arrangement. It is their choice to offer it. The Arrangement is settled in return.
The question is always what amount of money does the third party have to pay? Generally speaking it will have to be the sum of the remaining monthly payments. So if there are 24 months remaining and the payment is £200/mth, the offer would need to be £4800 (£200 x 24).
In certain circumstances it might be possible to settle with a smaller amount. However, this would normally be were you are unable to continue making monthly payments. Perhaps because your income has reduced for heath reasons.
What to start an IVA or need advice about your current Arrangement? Give us a call or complete the form at the bottom of this page. Our advice is free and confidential.