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An IVA (Individual Voluntary Arrangement) is a legally binding agreement that can help borrowers write off the unsecured debt they can’t realistically hope to repay in a reasonable time.

It’s an arrangement between them and their unsecured lenders: if they can agree on terms, the borrower will commit (in most cases) to making regular monthly payments for five years, and the lenders will agree to accept those payments, not to enter into/pursue any legal action against the borrower, and to write off all outstanding unsecured debt once the IVA has come to a successful conclusion.

IVAs - the step-by-step process

If you’d like to know more about IVAs, you should start by contacting an Insolvency Practice (an organisation that’s qualified to carry out IVAs).

Tell them about your finances and they’ll be able to tell you whether they think an IVA could be the right solution to your debt problems. If they do, they’ll tell you all about the pros and cons of an IVA. If you decide to go ahead, they’ll work with you to draw up an ‘IVA proposal’, which details how you propose to repay as much of your debt as you can - assuming the IVA goes ahead.

Then, it’s up to your lenders to vote on the proposal. If it’s approved by lenders who collectively ‘own’ 75% or more of your debt, the IVA can start. It’ll become legally binding on everyone, including any lenders who voted against it, or who didn’t vote at all.

Once your IVA has started, you’ll make just one payment per month, to your IP (Insolvency Practitioner - the expert who’ll deal with your case). They’ll subsequently pass on the agreed amounts to each of your lenders.

Note that your monthly payments will be based on what you can realistically afford once you’ve taken into account all your essential expenses, from your mortgage/rent and your utility bills to the cost of your food and essential transport. So IVAs aren’t appropriate for people who can’t commit to making those regular payments.

In most cases, this will go on for five years. If you’re a homeowner, you may be required to free up some equity from your home in the 54th month of the IVA, so you can contribute more to the IVA.

Once you’ve paid everything you’ve agreed to, your IVA will draw to a successful close. Your unsecured lenders will write off all the outstanding debt, and you’ll be legally debt free.

You IVA will, however, remain on your credit report for one more year, and this will make it harder and/or more expensive to obtain further credit during that time.

To see how an IVA could help you, click here.

Debt-to income ratio is a financial indicator that helps lenders to ascertain your credibility. Depending on the debt income ratio, a lender decides whether you should be given loan or not. It also evaluates the amount of debt that can be handled by you. Lenders fear losing their money. They have become exceedingly cautious and are approving loans only if consumers are financially responsible. This is where the role of debt income comes into play. In addition to your debt-to income ratio or DTI, credit score is another number that represents your financial responsibility.

Lenders have played a very instrumental role in igniting the subprime mortgage crisis. They approved mortgage loans to borrowers who didn’t qualify for one. This was done by manipulating income of borrowers, furnishing forged documents of property appraisals to help borrowers qualify for a mortgage. The credit crunch or recession is the outcome of the same. It is an aftermath of irresponsible lending that has devastated the American economy.

Debt-to income ratio has 2 ratios- the front ratio and the back ratio. The front ratio indicates your housing costs. It basically takes into consideration the PITI, the principal, interest rate, insurance as well as taxes.

The back ratio indicates the payments you make for your other debts. This includes credit cards, child support, alimony, student loans etc. It also includes the expenses that are mentioned in the front ratio. A debt-to income ratio of 28/36 is considered a standard. The FHA or Federal Housing Administration allows a debt income ratio of 29/41 to qualify for a loan.

Maintaining a debt income ratio allows you to enjoy several financial benefits that the lenders offer. The same is with your credit score. If you have a good credit score and a good debt-to income ratio, you are a lender’s favorite.

Credit card comparison will be very helpful when looking for a great rate.  Some of the credit cards may offer a 0% introductory rate for a given period of time.  The clue to using the comparison charts is to see what happens after that introductory rate ends.

Comparisons can give potential cardholders that information and more.  They will also give people information about a yearly cost to carry the credit card.  Even if people are looking for a credit card that gives them a good rate for purchases it can have other parameters that make it more attractive or less attractive.

Some have the stipulation that you have to have other accounts at the institution while others require that the cardholder be a certain age.  Employed are generally expected to get a credit card, but there can be no defaults, and they must be a resident of the UK and make a certain amount in income.  Still others will provide benefits for flights, shopping or cash rewards.  Choosing the right credit card for purchases will involve looking at all the details.  This is the main reason why going to a credit card comparison site such as creditcardcomparison.org.uk makes sense.  Everyone wants to save money and having the best credit card for their situation will provide the opportunity.