The financial needs for everyone are different and it’s highly essential to know the type of debt you have and how you want to repay it. There are many ways of repaying solutions like IVA debt and DMP in London. For the Scotland region, there is Scotland trust deed act as IVA debt solution and Sequestration act as a bankruptcy. But first, you need to understand the type of debt you have and whether is it secured or unsecured debt.
Types of Debt
Well, there are two types of debt Secured and Unsecured that are needed to be considered if you are trying to understand debt repayment.
Secured debt: Secured debt is those types of debt that are protected by some assents as collateral( house, car, etc..) The creditor can hold the assets until the complete payment is released, other items can be considered for the repayment of the loan too like( Stocks, bonds, and personal loans). These are some of the types of Secured loans:
- Home Loan
- Loan against property
- Loan against the insurance policy
- Gold loan
- Loan against mutual funds and shares
- Loan against fixed deposits.
Unsecured Debt: Unsecured debts are the opposite of secured debt were usually loans like credit card loans and student loans. The creditor takes more of the risk by making this loan as there will be no asset set as the default as a result the interest rate is high in the case of the unsecured loan. These are some of the unsecured loans are as follows:
- Personal loan
- Short term business loan
- Education loan
- Vehicle loan
Basically, there are certain things that make the IVA the better option as compared to the Debt management plan. If you consider IVA for the debt repayment following things you will gain.
- Its is a legal binding
- IVA gives a pause over the interest rate and charges.
- IVA has a guaranteed end date
- It is authorized
IVA a legal Binding
Considering IVA debt help is the best option as IVA is legally binding between the debtor and creditor. Legal binding refers as that the debtor will be protected from the creditor as long as he keeps up the IVA payments. Whereas the case of the Debt Management Plan doesn’t offer legal protection to the debtor.
IVA gives a pause over the interest rate and charges.
Another benefit of going off the IVA for debt repayment is that as soon as it has been approved the interest as well as additional charges are stopped and can’t be added by the creditor. This means that there will be guaranteed no rise in debt during the period of time one is in the IVA plan. Resulting in a regular payment in your debt. There are various facts about the IVA payment that should be considered for understanding IVA
IVA debt has a guaranteed end date
One of the important things to consider is the repayment of the debt is the time duration of the debt repayment period. No one wants to go for the long and uncertain period of debt paying. Another benefit of going for the IVA registration is that IVA usually has a fixed period of time for 5 to 6 years and in end IVA debt write-off takes place. But in the case of the DMP, the situation is different as the time period increase the creditor may add on interest respectively. Hence it’s somewhat difficult to predict when the plan will expire.
IVA debt are authorized
You can trust the IVA more prominently as in the case of the IVA if someone wants to go for the IVA plan he/she must go for the Licensed Insolvency practitioner, like Stepchange, Debtlines, etc. An IVA may affect the family, but as it’s authorized it’s quite manageable. In the case of the DMP, the case is different in this you can manage your DMP yourself or hire a third party to handle your creditors for you.
IVA debt write off
IVA is a form of insolvency were once the IVA time period is over the remaining debt gets to write off whereas in the case of the DMP the debt does get written off and one has to pay the full amount.
Some FAQs for better understaing that why IVA is a good option for the debt repayment.
1.What to do if we want to finish my IVA early?
You’ll have to pay your creditors a lump sum as a one-time payment and agree not to make any more monthly payments. They will accept this as payment in full, and the IVA will be completed.
2.Does iva affect credit rating?
Yes IVA does have a effect on Credit rating as It will be noted on your credit report if you enter into an individual voluntary arrangement. Because this figure is dependent on information in your report, your credit score will suffer as a result. You may find it difficult to borrow money if your credit score is low.
3.What will happen if your iva is terminated?
Once your IVA is terminated you will no longer be protected from creditors initiating legal action against you. The payments you’ve made toward your IVA will be considered, but still, you’ll be liable for the remaining outstanding money. The creditor has the power to start or stop charging interest on your obligations.
In conclusion, we can say that there are some advantages of IVA over DMP that must be considered. While determining the differences between the two. All of these elements must be considered when calculating an IVA. The step-change is the best option for your debt settlement as we provide a good option in the IVA plan. Some of the services we offer are Insolvency, bankruptcy, Debt management plan, IVA, and lots of other financial advice.