Summary: This article explains how a payday loan will fit into an IVA and also other debts that can be included in an IVA.
Payday loans are often a popular choice for those looking to top up their finances towards the end of the month in order to pay for bills or rent/mortgage. However, there interest rates are very high and if they are not re paid on time, they can become very difficult to clear which can result in an individual becoming insolvent (monthly debt repayments a greater than total monthly income).
What is an IVA?
An Individual Voluntary Agreement (IVA) is an alternative to bankruptcy for those with around £10,000-£12,000 or more of unsecured debt, are insolvent, and have in the region of £100-£200 left each month after all essential expenditure. Usually there needs to be at least 3 lines of credit split between at least 2 creditors. For example, a bank loan, a credit card and an overdraft will be 3 lines of credit, but they cannot all be with the same lender. In order to enter an IVA, the creditors must agree to the terms, but assuming they does, the debtor will repay an affordable monthly amount for a period of usually 5 years, after which time any outstanding debt will be cleared.
Can I include my payday loan in an IVA?
Assuming the individual meets the criteria for eligibility (see above paragraph 'What is an IVA') then payday loan debt may certainly be included in an IVA.
What other debt can be included in an IVA?
Generally speaking, all unsecured debt can be included in an IVA, including bank loans, overdrafts, credit cards, payday loans, utility bill and water arrears (if from a previous property), tax debt etc. There are a few exceptions, student loans cannot be included and nor can any debt associated to court fines, maintenance and/or child support, and parking tickets.