Is it possible to pay an IVA early

14/09/2023
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:

Already in an IVA and need help?

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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 major benefit you will get is that from then on, future increases in your income or windfalls you receive are yours to keep. You can do extra overtime or get a pay rise without having to worry that your IVA payment will increase.

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.

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.

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 settle 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. You can pay your IVA early with cash raised in this way. 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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52 thoughts on “Is it possible to pay an IVA early”

    Hugh David says:
    27/10/2021 at 12:05

    I would like to know how long it should take for my Pension Payment into my IVA account should normally take to process and then have the remainder payed back to me.

    Reply
      James Falla says:
      27/10/2021 at 12:14

      Hi Hugh

      I assume you have decided to settle your IVA early by withdrawing a lump sum from your pension? If so, once the agreed lump sum has been handed over to your IVA company it will normally the then between 3-6 months to complete the settlement process and send you your completion certificate. Any funds remaining would then be handed back to you at the same time.

      As a slight aside, I hope that before electing to draw your pension, you had a written agreement with your IVA company about the amount they would need to complete the settlement. If not, the withdrawal would simply be treated as a windfall (see last section of above article). You would will lose more money than you initially expected. They can take up to 100% of the original debt owed (less payments you already made), plus their full costs and fees and in some instances additional interest.

      Reply
    Hugh David says:
    28/10/2021 at 13:18

    Thanks for the information James.
    I have been waiting 5 weeks now for them to complete the closure of my account, they are taking £11,000 from my payments of £48,000 for a £6400. debt. this includes some £5000 in fees.
    So I guess I could be waiting a while yet, but I just wondered if I should be still paying my premiums into my account at this time while I wait for this process to take place, as my account is with the closure department already.

    Reply
      James Falla says:
      28/10/2021 at 13:20

      Hi Hugh

      Yes, it sounds as though you will be waiting some time yet for your completion certificate. Hopefully they are efficient.

      I strongly recommend that you contact the IVA company and ask them whether or not you should continue making your monthly payments in the meantime. You should get their response in writing. You should not stop your payments until you have confirmation in writing from them that you can do so.

      Good luck with it.

      Reply
    Paul M says:
    06/07/2022 at 12:51

    I want to pay off my partner’s IVA. Would I have to declare where the money has come?

    Reply
      James Falla says:
      06/07/2022 at 12:52

      Hi Paul

      For money laundering purposes, you would need to prove your identity (provide a copy of your passport or driving license) and you would need to show the funds are in a UK bank account. So you would need to provide a copy of the bank statement where the funds are.

      That should be all that is required.

      Reply
    Jane F says:
    15/07/2022 at 10:16

    I owe 16 payments on my iva at 814 a month how much do i offer them to settle this?

    Reply
      James Falla says:
      15/07/2022 at 16:46

      Hi Jane

      As a rule of thumb, to settle your IVA early, you will need to offer an amount equivalent to the sum of your remaining payments. So in your case this would be £814 x 16 = £13,000

      It might be possible to get a reduction on this figure if your circumstances have changed and you can no longer afford the monthly payments. However, if you want to settle for other reasons, you need to expect to pay this kind of amount.

      Reply
    Soni says:
    26/10/2022 at 17:50

    Hi I’m currently in an iva
    I have recently taken a new job and my salary has increased but it’s only a 1 year fixed contract. With my increased salary can I offer to pay my iva off early myself?

    Reply
      James Falla says:
      26/10/2022 at 17:59

      Hi Soni

      Unfortunately, it will not be possible to do this. If your income has increased, you need to speak to your IVA company straight away and let them know.

      Normally, they will review your new income and expenses budget. You will have to increase your ongoing monthly payment by 50% of any increase in your surplus. In other words, if your monthly payment is currently £100/mth and your surplus income has now increased to £200, your monthly payment will increase to £150.

      This increase does not mean your IVA is paid any faster. Your creditors simply get more of their money back. You can read more about this here: What happens if you get a pay increase during an IVA

      If you are worried or concerned about this and want more advice, please give me a call (0800 011 4712). Its free and confidential.

      Reply

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