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 normally has to come from a third party. For example your partner, parents or other family member or a 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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30 thoughts on “Is it possible to pay an IVA early

    Paul says:

    Hi I have received a cheque for £942, this is for marriage allowance over the past 5 year’s, if I declare this to my iva company will they take a percentage or the whole amount?

      Hi Paul.

      I assume you are talking about a tax rebate from HMRC? If so, this will certainly be treated as a windfall by your IVA company. As such, you should declare it to them and I would expect them to take 100% of the money received. This would simply mean that your creditors are repaid more of the debt they are owed. It would not mean your IVA is paid of any earlier.

    Juliander says:

    Hi. I’m 6 months into my Iva. Since then I have split with my Partner and my hours have reduced at work. I pay 355 each month and the Iva should last 72 months. I have two people who would like to help me by offering a lump sum one and final payment. One is my ex partner we are still married and we own a home. The other is friend.

    My question is can my ex help me? This Iva is mine only, but I’m not sure if there are any implications since we are married and share a mortgage. And how much would an acceptable offer be? My original debit was 48,000

      Hi Juliander

      If you are interested in settling your IVA with a lump sum payment, these funds can come from any 3rd party. There is no issue if this person is your ex-partner. There no more implications than if the lump sum was coming from any other person.

      In terms of the amount required, as highlighted in the article above, you need to offer the equivalent of your outstanding IVA payments (plus 12 months if you are a home owner). However, different IVA companies require different amounts, so you need to make this offer to them and see what they say.

    JaneV says:

    If I pay off my IVA will my credit rating stay very low?

      Hi Jane

      Unfortunately, yes. Whether you pay off your IVA early or not, the record will remain on your credit file for the full 6 years (from the start date) and your credit rating will remain poor. It will not start to really improve until 6 years from the start date when the record comes off your file.

      So paying off an IVA early does not really help improve your credit rating.

    Tina C says:

    I have 15 months left to pay in my IVA if I get a 13,000 lump sum pension at 55 will I have to pay more money back than the original agreed amount

      Hi Tina C

      If you turn 55 while you are in your IVA, it is very important that you do not draw down a lump sum from your pension without the proper advice and planning.

      If you just draw the cash, it will be treated as a windfall. The whole lot will then have to be paid into your IVA and yes, you may well end up paying back more than the amount of your original debt.

      There are two ways to avoid this. The first is don’t draw any cash from your pension until your IVA is completed. After you have your completion certificate, any money you draw is yours to keep.

      Secondly, it may be possible to use cash drawn from your pension to settle your IVA. However, you must get an agreement with your IVA company that you will do this BEFORE you take the cash.

    Bipin says:

    Once the overall amount of an IVA has been agreed can an increase in employment income change the overall amount to pay it off early during the term? i.e. can the total IVA amount change?

      Hi Bipin

      It is a common misconception that if you get a pay increase during an IVA, you can simply increase your payments and pay off the Arrangement early. In reality your payments are likely to increase. However, the impact of this will be that you repay more of the original debt you owed. You will still be obliged to pay the same number of payments. In short yes, the total amount you pay into an IVA can, and often does, change if your income changes.

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