A reader asked this in a comment, but it needs a whole article to tell the story properly:
“We are currently 4.5 years into an IVA, we have got to raise £15,000 through remortgage. We have been told from the start to not worry as there is little to no chance of us being offered it, however we have been offered a £15,000 loan over 15 years and paying back £45,000.
I can’t believe this is an acceptable arrangement as we are now not going to be “debt free” for another 15 years. Is there anything we can do about this?
Our IP says he may be able to offer our creditors extra 2 years in the IVA as a solution but that they may reject this offer. This just sounds ridiculous as we would have been better off selling the house in the beginning or going bankrupt. “
That’s 18.8% interest
It would be interesting to know how the secured loan lender set that horrible rate. Steve’s monthly IVA payments are £550 and his mortgage lasts for 15 years. Any equity release can’t cost more than half the monthly IVA payments so it looks to me as though the lender basically set those as the repayment terms.
In other words, the borrower is being charged as much as is possible for as long as is possible. Hard to equate that with treating customers fairly!
Most secured loan rates are also variable, so who knows what it would go up to in a few years?
No “secured loan clause”
Steve asked if there was anything he could do about having to take this loan. I suggested he checked his IVA terms and, as expected, these only referred to a “remortgage” not to a “secured loan”.
From this point on it seemed likely to me that if Steve just kept saying he was never told about a secured loan at the start and the wording doesn’t mention a secured loan, he was probably going to be able to reject this loan and just make 12 more IVA monthly payments instead.
During the next two months, Steve says his IP suggested at various times that:
- the secured loan rate was rather high but his hands were tied;
- the creditors might be prepared to accept 2 years of extra payments instead of one, but he couldn’t guarantee it;
- the term “remortgage” was always understood to include getting a secured loan;
- the reference in the IVA terms to “third party funds” meant a secured loan;
- Steve should try to remortgage with a 22 year term which would take him to state retirement age instead of 15 years; and
- the secured loan payments could be reduced by opting for a 22 year loan (true, but it would have pushed up the overall cost considerably).
Steve did try to remortgage with a 22 year term – unsurprisingly the high street lenders still said No.
In the end the IP gave in and proposed the standard 12 month extension variation. This has now been accepted by his creditors.
This has been an extremely stressful two months for Steve and his wife. I feel they were put under an unreasonable amount of pressure to agree to an expensive secured loan from a sub-prime lender when there was no legal obligation for them to do this. Steve’s verdict was “We honestly thought our IP was on our side. We would have probably rolled over if it wasn’t for you.”
What about recent IVAs with the secured loan clause?
This case doesn’t bode well for people who are starting IVAs now using the standard 2014 IVA Protocol, which says “Remortgage includes other secured lending such as a secured loan.”
The IVA Standing Committee has provided the following explanation about the new clause:
“The idea is NOT for a lengthy secured loan to be obtained. Debtors will be required to attempt to release the equity and will be advised to take advice from an independent financial adviser about the most appropriate product and repayment term.
There are safeguards in the protocol to stop the debtor from taking on unaffordable borrowing. These include (1) that the cost of the refinancing shall not exceed 50 percent of the debtor’s contribution at the date the refinance position is reviewed (2) that the refinance term does not exceed the later of the debtor’s state retirement age or the existing mortgage term (3) that the debtor is to obtain independent financial advice.”
What about someone who had an identical IVA and financial situation to Steve’s, with the new secured loan clause included – let’s call this person Sonia. Would Sonia have had to take out this secured loan? What is Sonia supposed to say to her IP who is pointing to the secured loan clause in her agreement? If her IP insists and Sonia tries to go to court about this, surely what matters is what she has signed, not how the IVA Standing Committee thought it would be used?
Would the so-called safeguards help Sonia? No. The proposed loan was less than half of the IVA payment (just) and it didn’t exceed the given time limits. I have no idea how taking independent financial advice is supposed to help matters – what is an IFA supposed to say apart from “Of course it’s an appalling loan, but that is what you have agreed to.”
Let’s look at a couple of arguments put forward for the new secured loan clause and see if they are reasonable.
“A secured loan could be better for the debtor”
It is possible to construct cases where a secured loan is cheaper than a remortgage. If Steve had had a base rate + 0.5% mortgage, then even the secured loan proposed would have been cheaper than remortgaging. But Steve’s mortgage wasn’t at one of these wonderful rates, and neither are the mortgages of most people who are in an IVA.
There was no need to introduce this clause to cover the small number of people who might benefit from a secured loan – any IP could have simply proposed to the creditors a variation saying they would get their equity release but the debtor preferred a secured loan to a remortgage.
“It’s just for a couple of years then the debtor can remortgage”
I think this is dangerous advice to give. Who knows what house prices, the mortgage market or the debtor’s situation will be in a couple of years? Any of these could prevent the debtor being able to remortgage at a reasonable rate, in which case they will be stuck with the expensive secured loan.
My conclusions
I have two conclusions to draw from Steve’s sorry saga.
First, anyone who doesn’t have a secured loan clause in their IVA should strongly object if their IP tells them they have to take out a secured loan.
Secondly, it’s really not good enough for the IVA Standing Committee to say “The idea is NOT for a lengthy secured loan to be obtained“. It has to be much clearer about exactly what secured loan a debtor may be required to take out. Steve’s loan provides the acid test: does the IVA Standing Committee think the option presented to Steve was reasonable?
- If Yes, then this needs to be highlighted to everyone considering taking out an IVA who has a house. Not as in “you may have to release equity which could include a secured loan but there are lots of safeguards” but very explicitly, quoting possible loans that the debtor may have to accept. I think Steve’s reaction will then be common “This just sounds ridiculous as we would have been better off selling the house in the beginning or going bankrupt.”
- If No, then the IVA wording needs to be changed to explain under what circumstances a secured loan will be required and what additional limits there will be on the interest rate and / or term of the loan that would rule out this sort of loan.
Update – July 2016 – a new version of the Protocol has just been published. I had hoped this would help, but it hasn’t clarified what a “fair” secured loan would look like – see 2016 IVA Protocol for details.
How to complain about an IVA secured loan
More than a third of IVAs fail
Joe Easedale says
All the IVA agreements that I have seen have an either /or clause, to the effect that if a remortgage is not arranged, then the IVA is automatically extended for X number of months instead. The remortgage can be arranged by the Debtor to any Lender that will lend.
I do not see therefore why there is an issue, but maybe the agreements I have read are not typical?
Sara (Debt Camel) says
Hi Joe, that was typical, and indeed Steve had those terms in his IVA. That didn’t stop his IP from saying this meant he had to take a secured loan.
But from January 2014, many new IVAs will include the phrase “remortgage or secured loan”. I think this could be a huge problem for the industry from 2018 as these new IVAs reach the equity release point.
The Saint says
This is absolutely ridiculous and it saddens me to think that you have been put in this position and not nearing freedom from your debts.
I have worked both directly and indirectly in the insolvency sector since the act was passed and this solution sees 10’s of thousands of people per year, both begin and end their journey to be free of often family destroying financial burden. It continues to be a sensible offering in the debt solutions market place since the welcome regulation by the FCA of the cowboy approach to what was the debt management market.
I have never seen anything other than a remortgage clause and don’t believe that this represents a valid clause in your IVA.
I would raise your concerns with the governing body the IPA, who will act swiftly on your behalf to draw resolution to you in this matter and if necessary come down hard on one of the few cowboys in a the market place, who I can only assume are a very small player, or this situation would have been glowing like an alarm before. The secured loan was another cowboy market the FCA rightly decimated several years ago. Let’s think about it: IVA and be legally released from debts you owe in a period that averages at 64 months and based on affordability you payback, or secured loan, which may be of an astronomical interest rate: spread over 10-25 years that you end up paying more than the total amount you owed in the first place.
Do as I say, without speaking to your IP, who secretly I would love you to name and shame and this will swiftly be resolved in your favour.
And for goodness sake, when that day swiftly arrives, enjoy being debt free. You addressed your issues correctly and deserve it!
Sara (Debt Camel) says
Hi, replying to some of your points:
– the “or secured loan” clause is now standard in many IVAs since 2014.
– I would not describe Steve’s IP as a very small player.
– there are reports on bulletin boards of people using other IVA firms also being told they have to take a secured loan even though that clause is not in their IVA. It appears that, like Steve, their IPs gave up when firmly challenged. The worry of course is that many debtors may not realise they can do this and may just “do what they are told”.
jamie says
Thinking of entering as iva might do dmp instead now
Sara (Debt Camel) says
Hi Jamie,
this is such a big decision. As a debt advisor I don’t like the fact that a previously very useful debt solution for people with large debts now seems much more difficult!
Have you had a look at my Iva or DMP comparison page: https://debtcamel.co.uk/hard-choices/iva-dmp/ ? If an IVA really does seem better for you – perhaps a DMP would take too long – then you could try contact several IVA firms and asking if you can have an IVA with no secured loan clause included.
Me says
Hi you mean IVA is not a good idea to take for settle your unsecured loans?i have been advice from Iva that it’s Better to take the Iva,and pay monthly for £200 for 60 months..example all my unsecured loan is worth 35,000 and if I can take the Iva I only need to pay £200 monthly that will cost £12,000 in 60 months,after that I’m free ,I don’t owe anything..that sounds good I think when they advice me that.
Sara (Debt Camel) says
You have posted exactly the same thing three times in answer to three different people. Please don’t do this.
Your comments are on a page talking about having to get a secured loan at the end of an IVA. Do you have a house? If you do, this secured loan article is VERY important as at the end of 5 years you may not be “free” at all, you may be stuck with a VERY expensive secured loan for many years.
If you don’t have a house, this article isn’t relevant to you. But with no house you need to ask why is an IVA the best solution – wouldn’t bankruptcy be better? Bankruptcy can’t go wrong – many IVAs fail leaving you with your debts. And in bankruptcy you only make payments for 3 years not 5. Check it out – see https://debtcamel.co.uk/hard-choices/iva-vs-bankrutcy/.
Robbie says
I have today received my Closure Certificate after nearly 7 years (5 years + 1 extra for “equity”). The Provider did try to get me to remortgage or get a loan but at 70 years old at that time, this was not really possible. I just hope that I can now sell my home, rent somewhere for less that my existing mortgage is and restart my life.
To secure my Certificate I had to sign a legal letter agreeing to any PPI repaid would be paid to the Provider. Since their representatives (2 different companies) have been trying to get PPI refunds from my creditors for the past 2 years, they are more than welcome to it.
I am glad to have completed it but wish that I had gone bankrupt in the first place and would have avoided all the stress that I have had. I also believe that my Providers were not honest in the first instance about the fact that more than half of the funds paid into the IVA would be taken by them.
Best of luck to everyone who is tied in to an IVA which is an area that now seems to be becoming even more difficult.
Mo says
Hi, I’m near the end of my joint IVA and month 54 will be approaching soon. My IP didn’t do any review in the last 2 years and we never received a request for info or a statement in usual manner. Under the term “third party”, can the IP force us to take a loan equivalent to the 85% equity? I heard that some IVA companies have a connection with loan companies who will offer a secure loan at high interest and that we are left with no choice but to take up the loan.
Many thanks in answering our question in advance
Sara (Debt Camel) says
Hi Mo, most IPs don’t try this at the moment as it is highly unlikely your IVA will have a secured loan clause, so there is no point in anticipating trouble. A few IPs are trying to claim either that the term “remortgage” includes a taking a secured loan or that the third party clause means you have to take a secured loan. To date most of these IPs seem to be backing down if you object strongly, as the person in this article did.
Markss says
My IVA finishes in April thank god I had no property assets because this would have been a nightmare situation if I had to take out a secured loan. I am sure most people would have opted for full bankruptcy and know that at the end there was it.
Andy says
Hello. I wonder if you can tell me how I can get some advice on this matter as my ip is telling me to take a secured loan and as this is not mentioned in my Iva , what can I do?
Sara (Debt Camel) says
Hi Andy, the first step is to ask your IVA firm to explain in writing why they say you have to take a secured loan. Many of them back down at this point! Also check all the details – are you happy about the house valuation or is there really too little equity for equity release at all? And review your current finances – can you afford the proposed secure loan repayments over the next few years?
Jim says
‘it’s really not good enough for the IVA Standing Committee to say “The idea is NOT for a lengthy secured loan to be obtained“. It has to be much clearer about exactly what secured loan a debtor may be required to take out. ‘
Totally agree; that comment is so typical of the amateurish output that the IVASC has consistently produced over the years. Good intentions; poor execution.
Gin says
In our IVA agreement it doesn’t seem to mention anything about a secured loan but my IVA company has got a third party involved and they are suggesting we take out a second mortgage for £5824, paying back £100 per month over 25 years, giving a total of £30,120.00. Is this acceptable? They also say that the interest rate could rise on that borrowing which means the monthly payment could increase.
Sara (Debt Camel) says
That’s 20% interest …
How old are you? How much is your house worth? How large is your mortgage? Is this a joint IVA? What is your current monthly payment?
jim says
..and is that £5824 inclusive of the fees/costs of getting the loan? How much are they?
Allan says
Hi just looking for advice on this issue as follows : I’m currently in 3rd year of iva current payments £110 a month original debt £26000 however I have interest only mortgage £170000 balance 9 years outstanding property is currently valued around £400000 so equity around £220000 mortgage is joint with wife sole iva my debts only. A remortgage will not be possible in year 5 due to income multiples payment increase above50% clause and mortage term will be short I’m currently 54 can I be made to take a secured loan for balance or can I refuse and pay 1 year extension. What does debt camel think lilikly outcome could be. (I want to stay in house for length of current mortage then down size )
Many Thanks
Sara (Debt Camel) says
Is there a secured loan clause in your IVA?
As you will only have 11 years to state retirement age when your IVA ends and a secured loan couldn’t cost you more than £55 a month (half your IVA payments) I would be surprised if any IVA firm wanted to insist on a secured loan.
Paul says
Hi Sara, unfortunately we find ourselves in the very same position as in your article. We are looking down the barrel of a 20 year secured loan as we have equity in our property. We are furious as this was not explained when we took out the IVA. We were told that high street lenders would not entertain us for a remortgage , so it was nothing to worry about.We are in a post 2014 agreement and the secured loan clause is there. However, it does not mention sub prime lenders.If we had been told this at the beginning we would not of entertained an IVA. So in short we were misled , we are going to be saddled with a further 20 years of debt at a high variable rate of interest, will be worse off in the long run and with no or little recourse. This can not be ethical and something needs to be done.
Sara (Debt Camel) says
I think there may be a lot of people in your difficult situation in the next few years as IVAs with this horrible secured loan clause come to the last year where equity release has to be considered.
“We were told that high street lenders would not entertain us for a remortgage, so it was nothing to worry about.” I assume this was on the phone not in writing. Was this by your IVA firm?
Have you been quoted terms of this secured loan yet?
Paul says
Hi Sara, yes it was over the phone( no proof I know) by our IVA provider , also their own website continues to state that it is highly unprobable that anyone will offer a remortgage when it comes to releasing equity(mis leading given the secured loan clause) We have not had the terms yet , but we have been looking around and given the amount we pay each month into the IVA they would have to push the loan out over 20years to maximise the lending. They also sent paperwork to sign for a firm of financial advisors that they use ( Our provider has stated using this firm will save us leg work) mmmmmmm. It is particularly ironic that our IVA provider wrote on our initial proposal that a DRO in their opinion would not be suitable as it would take 16 years to repay and we couldn’t possibly plan that far ahead. We can’t believe that IPs can get away with this kind of unethical behaviour.
Leigh says
We took out our IVA in 2013 and we are now almost at the end of 6 years of payments, it was extended for 12 months because we missed 2 payments. Anyway we have now been told by our IVA that we have to try and release equity, or the IVA will be extended for a further 12 months. I have been contacted by a company who said i have £5594 equity and i can have a second charge mortgage for £101.50 for 18 years! My IVA states remortgage or Third party. It does not say that i will have to obtain a secured loan, what position am i in, obviously a 12 month extension would be cheaper and would get us debt free quicker
Sara (Debt Camel) says
That’s … appalling. I make that 21% interest.
Can I guess that your IVA payments are about £203 a month?
Do you agree with the equity calculation?
“it was extended for 12 months because we missed 2 payments.” also that sounds odd – why was it extended by so much?
Leigh says
Yes 203, do i have to agree with this second charge mortgage as its a secured loan, my IVA was taken out in 2013 and does not state the use of a secured loan
Leigh says
IVA payments are 203, our IVA was taken over in January 2018 by another company who told us our payments had increased in the previous year following our annual review, we knew nothing of this so the 2 missed payments plus the so called arrears extended the IVA for 12 months, funnily enough we are still paying 203? The second charge mortgage is also only fixed for 3 years so who knows what this figure could go up to. I really don’t know what to do for the best. As my IVA was taken out in 2013 does this mean i don’t have to agree to this secured loan. I may as well have gone bankrupt 6 years ago, but we were desperate and we were led to believe that 6 years max we would be debt free because no company would offer us a remortgage
Sara (Debt Camel) says
Do you mean you were paying 203 before “the increase” and still are?
re the secured loan:
1) do you agree with their calculation of your equity?
2) how are you managing financially – do either of you have health problems or have work problems?
3) you can go back and dispute that you have to take out a secured loan. I’m looking for ADDITIONAL reasons to dispute the loan.
Leigh says
Iam still paying 203 and have been since May 2013, not sure about the equity figure as i have not fully looked into it, but its a bit of a coincidence that they say anything over 5k can be released and anything under is a 12 month extension, mine just happens to be just over 5k. My wife does not work but that is due to other issues, not illness. My concern is having to pay this for 18 years, they said i could i could increase monthly payments to 160 over 60 months or 185 over 48
Sara (Debt Camel) says
as you say, what a co-incidence. That’s why you need to look into the equity calculation as if it is bit lower this secured loan nonsense will go away. See https://debtcamel.co.uk/iva-equity-release/.
Have you been told how much of the 5594 will actually be paid into your IVA, as opposed to being fees for the loan to be set up?
Leigh says
I have not been properly told any details yet, they are sending it out on the post for me to sign. I have no idea how they have come up with an equity figure as no valuations have been done on my property and we have not been asked to provide any
Mrs D says
We had our property valued in month 54 – it was no where near a proper valuation – much lower than what it was actually worth but we weren’t going to argue with that. They asked us to remortgage – but no one is going to touch us whilst you are in an IVA but we did ask our bank and obvs they said no. They then offered us a secured loan via a loan company – it was absolutely ridiculous, an extortionate amount to be repaid over a ridiculous amount of time which in reality would leave us with more debt. I point blank refused to do the loan and explained to them the reasons and said I would take it further if I had to. I responded to them and said that we can’t remortgage / we are not taking out a secured loan/ no family member is going to lend us the money (I think they wanted about 6K to settle it) and therefore we will pay it for an extra 12 months (the cheapest option) – take it or leave it. We didn’t hear from them for about 5 months (so well into the 6th year of payments). They didn’t even query it they just confirmed that what I was proposing they were acccepting. We made our last payment in January and its all done and dusted now, thank god.
Tom says
Hi
I am coming to the end of my post 2014 IVA and am at the equity release stage. I have the secured loan clause in my agreement, but I will check this later. I have £60,000 of equity remaining in the property and the total owed for my IVA debts are £17,000.
My IVA repayment rate at the moment is £130 per month.
The term on my mortgage is up in 8 years, and my state retirement is 14 years.
If my understanding is correct, any secured loan offered to me cannot extend beyond my state pension age.
I also believe that any repayments on the loan cannot exceed 50% of my current IVA payments, which will be £65 per month. So any loan which is proposed to me by my IVA supervisor must fall within both of these constraints?
A very rough calculation of a loan of £17,000 at 9.9% interest over 14 years would result in monthly repayments of £183.09 per month. Given my credit rating, I feel my interest rate is likely to be higher than this.
If the IVA company are unable to offer me a loan which has repayments of £65 per month or less, am I entitled to refuse the loan and request the 1 year extension instead?
Many thanks,
Tom
Sara (Debt Camel) says
“The term on my mortgage is up in 8 years, and my state retirement is 14 years.
If my understanding is correct, any secured loan offered to me cannot extend beyond my state pension age.”
The typical clause in an IVA says that any remortgage or secured loan can’t be for more than the longer of your current mortgage or your state pension age – so unless your IVA wording is unusual, you are correct.
“If the IVA company are unable to offer me a loan which has repayments of £65 per month or less, am I entitled to refuse the loan and request the 1 year extension instead?”
You won’t be offered a secured loan that costs more than £65 a month.
But you could say be offered a £5000 loan at 13% interest for 14 years – monthly repayment £61.
I hope not and that your IVA firm will accept you maing an extra year of payments. Who is your IVA firm?
Tom says
Hi Sara
Thank you very much for the fast reply!
So, to ensure fully understand – does this mean that my total ongoing payments will be at most £65 per month, or will it be £65 per month on top of my current payments if £130 per month (meaning a possible future payment of £195 per month)?
The clause in the IVA protocol of 2014 states that “The incremental cost of the remortgage, including cost of any new repayment vehicle, will not exceed 50% of the monthly contribution at the review date.” – The word “incremental” in that sentence concerns me a little. I cannot afford ongoing payments of £195 per month.
My IVA firm is Aperture and they have some company valuing my property. They have offered me a loan that will be paid back in 8 years – I have not accepted this and I have not even seen the repayment plan options so I don’t know what that will look like. I can’t imagine those payments being less £195 though, and certainly they’d be more than £65
Thanks again!
Sara (Debt Camel) says
£65 a month (or your current mortgage payment plus £65 if a remortgage is being proposed – that is where the “incremental bit comes in.)
You need to know the details of the loan. Can you find out and come back here with them?
Tom says
I will get the details and then get back to you.
I am also not sure if they are offering me a loan at the moment or if this is a company they have sourced who will remortgage for me.
I’ll find these little bits out and get back to you.
Thanks again
Frank says
Hi Sara, I am in a joint IVA/ Joint Mortgage post 2014 terms that state the possibility of a secured loan. My IP just requested I need to get a redemption statement from my current lender.
My IVA is with stepchange and I know they have their own finance arm according to their website. After reading the above I feel sick as to what future holds.
I’ve struggled to keep this IVA on track for the past fifty eight months and it’s already been extended because of missed payments. We currently pay £434 pm and my redemption statement says £47581 outstanding on the mortgage. StepChange valuation at beginning of term was £70,500 on the house and I believe that there is still £17000 outstanding to my creditors.
I can’t believe I haven’t thought of the above mentioned as I was always thinking positively and that an extra twelve months would probably be the worst outcome. I couldn’t have been more wrong by the look of things. I can’t believe how this secured loan aspect is allowed, I was hoping to be debt free after six years.
Wow, it seems I have been very ignorant of the dangers that await, I shall keep you posted over the coming months, thanks – Frank.
Sara (Debt Camel) says
I hope you will be fine and just have to pay the extra 12 months. I have never heard of StepChange asking anyone to take an expensive secured loan – I woukd be very surprised if they do. Please let me know what happens!
I am concerned that you have struggled throughout your IVA. Have your expenses gone up more than your income? Have you asked fir your payments to be reduced? StepChange can cut the payments by 15% without thus having to be apprehended your creditors if they think it is reasonable. With 14 months to go this is worth looking into.
ALSO if the worst happens and you have to get a secured loan (which I do not expect with StepChange but could happen with other IVA firms for anyone else reading this) the more you can get your current IVA payment reduced, the less the future secured loan woukd be allowed to cost.
Frank says
Thanks for your response Sara. I have probably utilised all the help options over the five years Sara, it’s just that the margins are so tight and it’s probably one of the most difficult things I have had to do with my finances.
I would discourage anybody to get an IVA as the legal agreement and their ability to bankrupt you in an instant is the most hellish scenario financially.
Then just when you think you’ve nearly achieved what you set out to do they want you to now turn unsecured debt into secured debt and end up paying back more than you ever owed over many years? If you say no they can just bankrupt you anyway, after all this time.
Who in their right mind would go through with that in full knowledge that it is the plan they have set out for you? I suspect nobody would!
Thanks
Frank
Chris Bone says
This secured loan notion linked to IVA’s is outrageous, my own observations would be:-
– If we accept that whatever form of Insolvency is adopted it has or should have a end period for relief from debts (ie12 months usually for bankruptcy discharge or end of DRO moratorium), and previously, 5 years possibly extended to 6 for IVA’s, how does this secured loan idea fit into that principle! Surely the Insolvnecy Service should recognise and act on that alone.
– If we look at 2 key criteria for lending, namely affordability and credit rating, how does that work with secured loans? The credit rating will be shot, and I am assuming the affordability check is glossed over by saying that if you can afford 5 years’ IVA contributions, you can afford secured loan payments? it smells very much of IVA firms getting into bed with second tier lenders, and god knows what “fees” passing between them at the poor debtors expense. Not to mention probable valuation fees and solicitor and administration fees.
It’s scandalous.
Sara (Debt Camel) says
one of the main ways of challenging these secured loans is on affordability. Unfortunately it requires someone to contact a good debt adviser, not just accept what their IVA firm tells them they have to do. Near the end of an IVA many are simply scared of their IVA failing if they don’t agree.
Nina de Salis Young says
Hi Sara,
The update to this article refers to the IVA Protocol 2016, but there is now an IVA Protocol 2021 which includes the clause ‘The incremental cost of the additional secured borrowings, including the cost of any repayment vehicle, should not exceeds 50% of the anticipated final payment due into the arrangement.’ Still costly for the client, but I think many would wish to challenge on grounds of affordability.
Sara (Debt Camel) says
it’s good to challenge your payments during the last year, so that the amount you may have to pay in is reduced.
Nina de Salis Young says
(by the way your newsletter email of 19 Sep contains the intro ‘A reader has sent me copies of the documentation that Debt Free Direct (DFD) are asking him to sign to change the terms of his IVA. It includes: a Deed of Assignment, which relates to PPI reclaims, and a Variation in IVA conditions to adopt the 2014 Protocol. DFD has over 24,000 IVAs outstanding so this […]’ …but the link redirects to the article above – is that right?)
Sara (Debt Camel) says
yes it is. That other article was old and is now deleted.
AnonymousStrawberry says
Hi
I’d love some clarity about the equity clause in my IVA. Within my proposal it states “As can be seen from the above, based upon 85% of the value of the property less secured borrowings my equity in the property is less than £5,000. I therefore propose that my Arrangement will be based on
60 monthly contributions with no requirement for a further review of the value of the property. ” There are no modifications within the chairman’s report mentioning my property. I have also read on Creditfix’s website “If that figure is less than £5,000 at the outset of your IVA you will not be required to undergo any further review during your IVA and your IVA will simply last for 60 months.” Am i right in interpreting this as they cannot ask me to remortgage but the term of my payments will remain at 60 months?
I called Creditfix this week, i am 33 months into the 60 month term with the remaining total payments being £5400. They advised me that if i settle the IVA now through third party funds, i have to pay the remaining payments of £5400, PLUS as extra 12 months which will approximately £8200, as i may have equity in my property and the creditors will want any potential equity. I’m wondering if they can change the terms if how im interpreting this is correct? Thank you in advance! ive learned a lot and managed to trawl through the proposals and other documents as well as the courage to call creditfix to try an get a better understanding! So thanks again
Sara (Debt Camel) says
I think your interpreation is correct. Go back to them and query this. Put in a complaint if they don’t change their minds.
AnonymousStrawberry says
Thank you for your reply, I will contact them and I’m ready to put in a complaint if I have to. I just wanted to ensure I wasn’t misunderstanding what is in black and white before contacting them!
I also wanted to ask, can you take out a secured loan during an IVA? My mum has offered me £2000 but I’ll need to come up with £3400 to make up the settlement figure. If I can’t find a way to raise/save the rest, and a secured loan isn’t an option then I will continue my repayments as usual until either I have the funds or the end of the term.
I was completely missold this IVA like lots of people I’m reading about, I can luckily afford the repayments without pressure, but in the next two years I want to move home, I naively didnt know the effect this would have on my property or moving. After dealing with PTSD, I mentally can’t take where I live much longer I need to move closer to my friends and family. I may be naively hoping that by getting this settled, although it will still show until October 2026, I will have built some sort of credit score and the option for me to move will be better and may improve my options when it’s time to remortgage.
I’ve cried all week about this, but it’s a lesson I’m in some way grateful for.
Sara (Debt Camel) says
Getting any credit would require the permission of your IVA firm.
Settling the IVA is very unlikely to make it easier to get a new mortgage until the IVA has dropped off your credit record 6 years after it started. if that is the reason you want to settle, you may have to just cross it off the list and go through until the IVA ends.