Is it possible to pay an IVA early

Is it possible to pay an IVA early

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:

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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.

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8 thoughts on “Is it possible to pay an IVA early

    Gemma says:

    Hi

    I’m 3/4 months into an Iva paying £133 I maybe coming into some inheritance how much would be left to pay? As I spoke to my Iva firm earlier and they told me if I paid early it would be up to/maybe more than £14,000

      Hi Gemma

      The problem here is that you can’t normally settle an IVA with inheritance. Inheritance is a windfall and so, as per the terms of the Arrangement, 100% of any money you receive from this source has to be paid in over and above your normal ongoing payments. It simply means that your creditors will receive more of their original debt back than first anticipated.

    Gemma says:

    Okie dokie no problem. If I don’t get the inheritance, an save the money to pay off the Iva what will I have to pay back? Savings would be from over time at work saved over so many months…..

      Hi Gemma

      Saving during an IVA is sensible. However it will be very difficult to save enough to settle your IVA early. You will normally have to pay the equivalent of your outstanding payments which would be around £7000 (56 x £133 = £7448). Yes, the balance will reduce with each month you pay, but even so saving this much would be a stretch. Remember if you earn overtime during the agreement 50% of it will have to be paid into the Arrangement on top of the normal monthly payments you make……

    Adam says:

    I’m in an iva at the moment and my ppi claim as come back successfully but the check is going to my iva company does this mean that I can pay my iva off earlier than originally planned ?

      Hi Adam

      I am afraid the PPI compensation is a windfall. As such all the money received from PPI claims must be paid into your IVA. You still have to continue with your monthly payments as normal. The IVA will not be paid any earlier. Your creditors will simply get more of their money back.

    Chloe says:

    So I am currently in an iva a recieving compensation and want to pay off my iva is that possible?

      Hi Chloe

      Whether or not you will be able to pay your IVA early with the compensation you have received will depend on why you received it. Generally speaking compensation is considered a windfall. As such (as discussed in the above article) this money would have to be paid into your IVA regardless and you would have to continue making you monthly payments as normal.

      The only time you might be able to use it to settle early is if there is some reason why it does not fall into the windfall category. An example of this would be if you receive personal injury compensation awarded specifically for pain and suffering (but not loss of earnings).

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