You have the option to pay an IVA early rather than continuing with the monthly payments. However the money required can only come from a few particular sources.
Included in this article:
- Can you pay an IVA early?
- Could you settle your IVA if you get a windfall?
- Using home equity or your pension
Can you pay an IVA early?
It is possible to pay an IVA early after the monthly payments have started. As a rule of thumb the amount you will have to pay must be equivalent to the total number of payments outstanding. So if you pay £180/mth and have 40 months remaining, you will have to pay £180 x 40 = £7200.
You might be able to negotiate a small discount. But you will pay approximately the same as if you had continued with your monthly payments. So what is the point? The advantage is that the Arrangement will be over. From then on future increases in your income or windfalls you receive will be yours to keep.
The cash you need can come from a third party. Normally people settle an IVA with a lump sum borrowed from a family member, partner or friend. Once the Arrangement is completed you are free to pay back what they have lent you.
You may not save much if you pay an IVA early. However any future overtime or increases in your income will be yours to keep.
Could you settle your IVA if you get a windfall?
Normally a windfall such as inheritance cannot be used to pay an IVA early. This is because the money will be simply swallowed by the Arrangement. Your standard monthly payments will continue as normal.
The only time you can pay off an IVA with a windfall is if the amount you have received is very large. The funds would need to be sufficient to pay the outstanding balance of the total original debt plus your IVA company fees and interest.
You can’t use a redundancy payment received after losing your job to pay off your IVA. You will be allowed to keep up to the equivalent of 6 months net pay. Any extra will have to be paid into the Arrangement and you continue making your payments as normal.
A windfall you personally receive will normally have to be paid into your IVA. It can’t be used to pay the Arrangement early.
Using home equity or your pension to pay an IVA early
If you are a home owner it might be possible to pay your IVA early with equity released from your property. There are options to raise the necessary funds by remortgaging or taking a secured loan.
Your current mortgage lender will probably not be able to help. You will need to use a specialist mortgage broker who will work with you to find appropriate lenders.
If you reach the age of 55 during your Arrangement you might have the option of releasing a lump sum from your personal pension. Cash raised in the way can certainly be used to pay an IVA early. However it is important you do not take money from your pension without prior agreement from your IVA company.
Interested in remortgaging to settle your IVA? Give us a call (0800 011 4712) or complete the form below.