Before we get started with why you shouldn’t use Critchleys, it would be best to properly explain what an Individual Voluntary Arrangement is and whether or not you might be eligible for one. First of all, an Individual Voluntary Arrangement (or IVA, as it is often shortened to), is a legal contract that binds a person and their creditors to an agreement that Critchleys will draw up. Essentially, it requires the individual with debt to pay their creditor(s) a set amount of money for a set period of time, until everything they owe the creditor(s) is paid back to them.
Not everyone is eligible for an Individual Voluntary Arrangement with Critchleys. To be considered for this type of financial agreement, you must have debts that amount of at least £15,000, and you must owe this total amount to three or more creditors. To clear that up, that’s a minimum debt of £15,000 to three financial providers; you could owe all three creditors £5,000 each, and you would be eligible for an IVA.
Who are Critchleys?
Critchleys is seen as a leading independent advisory firm in Oxfordshire. The company provides various advisory services, including personal financial planning as well as corporate finance and business recovery.
Why are IVAs useful?
An Individual Voluntary Arrangement would be useful to any person or persons who have found themselves with such a large financial debt that they cannot find a way out of the hole they’re in. Once you have an IVA in place for your creditors, they cannot contact you regarding your debt and repayments, unless you have missed a payment agreed upon by the IVA.
Everyone can sympathise with how stressful constant calls and requests for money that you don’t have can be. An IVA can put a stop to that, by helping you and your creditors come to an agreement about how much you can actually afford to pay, and how long it will take you to pay them back.
How long does an IVA last?
The typical IVA agreement that Critchleys will arrange can last up to five years, though some creditors might be willing to go as high as six years. Reading that, you may not be certain that you can afford to make enough repayments to pay back what you owe in that time. If that’s the case, then you might be interested to know another clause of an IVA: Once the agreement’s time is up, if you have not completed your repayments, any debt you owe is wiped.
At least three quarters of your debt, no matter how many creditors you owe, must be in agreement to the IVA’s terms and conditions. For example, if you owe £20,000, the creditors of £15,000 of that debt must agree that they’re happy to go forward with an IVA. Once that happens, you will be completely eligible to the terms of an IVA, and subject to the conditions that Critchleys and your creditors agree on.
Is a Critchleys IVA the right thing for me?
For someone who is struggling to make repayments to their creditors, it may seem like there isn’t a way out or a light at the end of the tunnel. An IVA ensures that you don’t pay more than you can afford, which means that you can keep your home running and food on the table. Debt can feel like a struggle no matter how much you owe, but for those owing £15,000 or more, it can be life-changing and daunting to pay back money that you just don’t have.
In this situation, an IVA could be the best solution for you. For a homeowner who has tried absolutely everything else possible to clear their existing debt, an IVA will allow you to negotiate with the creditors that you owe; until you reach an agreement which benefits all involved parties.
Any person considering doing an IVA with Critchleys should be made aware that they cannot borrow from any other financial lenders during the period of their IVA or until their debt is cleared. An IVA will be noted on your existing credit history file for exactly 12 months after it has cleared. This does make it much more difficult to borrow after your debt is dealt with, but it does mean that you won’t be in debt anymore, so you can start to spend smarter and rebuild your credit in the best way.
How do I set up an IVA with Critchleys?
An Individual Voluntary Arrangement can only be pulled together with a qualified firm such as Critchleys, it is not something that can be agreed upon just between a creditor and a person in debt. To set up an IVA, you will need to contact Critchleys, who can draw up the contract for you and check that you are eligible for it.
Critchleys are professionals who is qualified to give advice for any aspect of financial ruin or bankruptcy. They are the perfect financial professional to speak to about an Individual Voluntary Arrangement and will be able to properly aid you in setting up your IVA with your creditors.
Given how intensive this process is, it’s always a great idea to find someone who is friendly, easy to work with, and well-reviewed. Ask for recommendations from friends and family or seek advice from your local council or Citizen’s Advice Bureau (or similar).
What is the criteria for an IVA with Critchleys?
To start off, other than having debt that you are struggling to pay, you should know that you will need approximately £100 spare each month that you can use to pay your creditors. It’s unlikely that a creditor will be willing to sign an Individual Voluntary Arrangement if the individual cannot pay a substantial amount back to them, even though it may be a fair bit less than they were originally asking for. £100 shows that you have the finances to start paying back what you owe, without leaving you in a bad situation.
However, IVAs can be flexible. Critchleys will be able to help you look through your finances to discover how much money you can spare each month after essentials. They can also help you figure out how to increase the money you have spare each month from your income.
Those looking to sign an Individual Voluntary Arrangement will also need regular income that can be easily predicted. An individual whose income fluctuates, or someone who does not earn from a job, may not be able to get an IVA.
Paying your way to an IVA
IVAs also take into account any assets a person owns, as well as their pension if they are over 55. If you’re a homeowner, then you should be made aware that many IVAs will require that you have a professional valuate your home during the last year of your agreement. You may be required to re-mortgage your property for the IVA, depending on your circumstances.
An IVA does need to be paid for to be set up because the agreement is overseen by Critchleys, who has lawyers or an accountants. Depending on the particulars a Critchleys IVA can cost around £5,000, though they can be as low as £2,000. An IVA is usually seen as a last resort; an attempt to show creditors the real financial situation that you’re in, but Critchleys isn’t inexpensive to employ.
Some Insolvency Practitioners will ask for their fee payment before they will begin setting up the Individual Voluntary Arrangement between you and your creditors, while others will take the fees as part of the repayments that you make.
With an IVA, you don’t pay your creditors directly, as such. You make a payment each month into the IVA, itself, and that is paid to your creditors. By doing this, your Critchleys can take their fees the same way your creditors take the money they’re owed. In a way, the Critchleys becomes another creditor that you owe money to.
Always ask for quotes from several Insolvency Practitioners before you make your final decision if Critchleys is right for you. Find the best fees and arrangements for you and try to attend an initial meeting with each one so that they can understand your situation before they work with you.
Does an IVA with Critchleys mean bankruptcy?
The short answer is no. An Individual Voluntary Arrangement is extremely different to bankruptcy and could even be considered a solution to applying for bankruptcy. Though bankruptcy and IVAs are both kinds of insolvency, bankruptcy involves all of your assets being sold to pay off the debt you owe, while an IVA gives you the time you need to get your affairs in order and start paying off your debt without everything being sold.
Bankruptcy can be applied for by an individual who is in a large amount of debt, or a creditor can force a person into bankruptcy if you owe them a substantial amount of money. To do this, the creditor would apply for you to be declared bankrupt, rather than you applying to be considered as such.
IVAs are applied for when a person owes at least £15,000, while bankruptcy can be considered when you owe a creditor at least £750; which is much lower. Bankruptcy lasts for just a year but will remain noted on your credit history file for six more years. Similarly, an IVA can last for up to six years, and will remain on your credit history file for an additional year after the end of the agreement. If you qualify for an IVA, it is almost always the preferred solution. An IVA allows you to pay back a set amount every month and does not require the sale of your property or assets. Bankruptcy is much harsher, and requires that all possible, non-essential assets (within reason) are sold to pay off the debt that you owe.
At the end of an IVA, if you haven’t managed to pay back what you owe, but have remained up to date with your repayments, your remaining debt is wiped off. Both bankruptcy and IVAs are solutions to financial hardship where you owe creditors a substantial amount of money, but an IVA is preferable because it’s much more manageable.
Your main responsibilities, in regard to your Individual Voluntary Arrangement, is to keep up with your repayments. If you do not manage to keep on top of your repayments, then your Insolvency Practitioner is completely within their rights to cancel your IVA.
Once your Individual Voluntary Arrangement begins, it will be listed in an online database that is accessed by agencies that need to check your credit rating and history. An IVA does affect your credit rating for up to a year after you clear your debt, which can make it more difficult for you to open new financial accounts or take out financial products. However, there are so many benefits to taking out an IVA as a solution to your debt.
A Critchleys Individual Voluntary Arrangement can help you settle your overwhelming debt with any and all of your creditors, while ensuring that your debt is cleared after the contracted period – as long as you keep up with your repayments.
As an IVA is set up through an Insolvency Practitioner like Critchleys, you will not need to contact or pay your creditors yourself. Critchleys will set up the IVA for you to pay in to, and they can also contact your creditors on your behalf.
Once your IVA is in place, none of your creditors can take any legal action against you. They cannot take you to court, and they cannot apply to make you bankrupt. Any and all interest or additional charges are also stopped. You only pay back what you can afford to, and you only pay back what you want.
If nothing else, an Individual Voluntary Arrangement will enable you to redesign how you save and manage your finances. The first step is usually looking at your budget, checking your incoming finance and your outgoings, and figuring out exactly what you can afford to repay to each of your creditors. With the help of a great Insolvency Practitioner, any struggling individual or family can get back on track with ease.
Consider debt consolidation
Debt consolidation is one of four main ways people manage their personal debt:
- A Debt Management Plan (DMP): This is where you work with a registered DMP provider such as Critchleys to set up an agreement to pay off your debts in instalments, usually over 5 years.
- An Individual Voluntary Arrangement (IVA): This is set up by an insolvency practitioner like Critchleys
- Bankruptcy: This is a last-resort option where you cannot pay off your debts because you lack the finances or assets to pay off your debts.
- Debt Consolidation: A way to consolidate all of your debts into one single debt source.
What is debt consolidation?
Debt consolidation is a very popular method of managing your debts because it effectively rolls all of your collective debts into one.
Using debt-consolidation will enable you to pay off your existing debts in full but in a way that is much easier to manage.
Instead of trying to keep on top of multiple payments leaving your bank account at different times of the month going towards your creditors, you will consolidate all of your debt into one single payment. This is done by taking a debt consolidation loan.
How Does Debt Consolidation Work?
Debt-consolidation helps lots of people to better balance their budget. It can help you to more clearly focus on paying back your debt in one single monthly payment.
It can even help you to save money because the monthly fee paid for your consolidation loan may work out much lower than the collective interest payment rates you were paying on your debts.
You consolidate your debt by setting up a new credit account. You then clear all of your outstanding debts with your creditors. You will then start to make one single payment towards paying off your new loan.
Should I consider debt consolidation?
If you have outstanding debts owed on credit cards, personal loans, store cards or catalogues, you can use a consolidation loan to pay all of these debts off.
Debt consolidation works well for you when it will cost you less to pay off your consolidation loan rather than paying off your outstanding debts at their regular rates, plus interest.
For example, you may be able to reduce the amount you spend on your debts each month because you can spread your consolidation loan repayments out over a longer period of time at a lower payment rate.
This can help give you a bit of spare cash to save towards a holiday, new car or to give you a cash buffer to draw on in cases of an emergency.
Work out what you can save
While a debt-consolidation option may sound like a good idea, you need to make sure that this is the right option for you to take.
It would pay you to sit down and take a look at your outstanding debts to work out how much money could be saved through consolidating your debts.
Things to consider are:
- The differences in interest rates between your new debt and your existing debt
- The length of time needed to clear your new debt compared to your existing debt
- How much total debt you will have to pay off
Look at how the costs of interest will add up between your existing debts and your new debt. It will only be financially smart to consolidate your debts if you can save money on interest rates.
Work out how much debt you carry
Before you can get a clear picture of how much money you can save by consolidating your debt, you need to know exactly how much debt you have.
Don’t leave anything out here or you may end up paying more money to clear your consolidation loan plus any small debts you don’t consider as important.
Be careful when you look at taking out a debt consolidation loan. Knowing how much debt you want to consolidate and the amount you need to borrow to cover your debts is essential so you can choose the right type of debt consolidation loan.
When will the consolidation loan be paid off?
An important factor of taking on a consolidation loan is knowing exactly how long it will take for you to pay it off.
Your payment plan will still impact on your monthly budget just as your existing debts do. However, if you have a plan in mind for a major change such as moving house or buying a new home in 3 to 5 years, you need to understand how paying your consolidation loan off will affect your plans.
You could choose to take out a consolidation loan with a higher repayment rate that means you will be able to pay off your debts much quicker.
On the other hand, you may choose a repayment plan over a much longer period of time to enable you to save a bit of money each month towards your house move or deposit for a new home.
Determining how much you can comfortably pay each month towards your loan will also affect your repayment terms and interest rates.
Common debt-consolidation FAQs
There is a lot to think about when considering rolling all your existing debts into one consolidation loan.
Let’s take a look at some of the most common frequently asked questions about consolidation loans. Use these to help you decide if this approach is the right path for you.
Is it a good idea to consolidate my debt?
Carrying debt of any kind isn’t exactly ideal, but consolidating your debt can be a sensible choice if it works out cheaper in the long run for you to do.
Will debt consolidation affect my credit score?
Taking out a consolidation loan can both positively and negatively affect your credit score. This sounds confusing, yes? However, it is quite simple to explain.
Taking out your new loan, and therefore a new debt will mean you having a deep credit scan that will negatively affect your credit score.
On the other hand, going through debt-consolidation will help your credit score over the long term because you will have just one affordable monthly payment to keep up to date with.
This improves your repayment record and your credit score and shows potential new lenders that you are organised and prompt with your payments.
What type of debt can I consolidate?
Common types of debt that people choose to consolidate include:
- Credit cards
- Car loans
- Personal loans
- Store cards
- Catalogue balances
- Utility debts
- Tax bills
What is the difference between debt-consolidation and a DMP?
Taking out a debt-consolidation loan can be the better choice for you if you know that you can comfortably afford your debts.
A debt management plan (DMP) with Critchleys is more suited to people that have run into financial trouble and are struggling under the weight of their debts.
A DMP is a good solution to help manage your debts and pay back what you can afford. A DMP usually lasts for five years, but can be extended under certain circumstances.
The major downside of choosing a DMP is when you are a homeowner with equity built up in your house. You will need to release that equity in the last year of a DMP to pay towards your debts.
This can mean re-mortgaging your home or taking out a personal loan to cover your equity payment. This can work out more expensive in the long run due to the negative effect a DMP will have on your credit score.
When faced with a choice between debt-consolidation, DMP and bankruptcy, the safest route to follow if you have a steady income and can afford a reasonable level of repayment would be the debt-consolidation route.
The advantages of a debt consolidation loan over a DMP with Critchleys
Taking out a debt-consolidation loan will mean that you will have enough money to pay off all of your outstanding creditors.
In most cases taking out a debt-consolidation loan will be cheaper in the long run than paying your current debt rates and interest charges.
The rates of interest on a consolidation loan are usually lower than an average credit card, so you can pay off your credit card balance and still be able to use your card sensibly to build your credit score back up.
Taking out a debt-consolidation loan to clear your debts and paying it back regularly and on time will help to raise your credit level over time.
The disadvantages to consider
If you already have a poor credit score, you may only be able to get a loan with an unfavourably high-interest rate. If this is the case you will need to work out if it would be cheaper, in the long run, to keep on paying your existing creditors rather than take on the loan.
Should you have a negative credit score you may not even be able to qualify for a consolidation loan.
You need to be sure that you can comfortably pay off your consolidation loan in full. Should you fail to make your payments on time or you will struggle to meet them, you will incur late payment fees that will add to your debt and make it more expensive.
What do I need to qualify for a consolidation loan?
There will be certain requirements that you need to meet to be able to qualify for a consolidation loan.
These requirements will vary from lender to lender, but the most important requirement will be proof from you that you are financially stable enough to be able to manage your loan repayments.
Lenders will want to see your proof of income to be sure that you are in a stable job with a steady and reliable income.
They will also want to make sure that your income is high enough for you to be able to afford to meet your monthly payments as well as your other financial commitments such as your rent or mortgage and household bills.
Your lender will need to check your credit history before they decide to offer you a loan. They will use your credit score to work out your loan interest rate, so the better credit score you have the lower your loan interest rates should be.
What about using a balance transfer card?
If you are only carrying credit card debt rather than multiple debts from different lenders, then you could look at using a balance transfer card to move your debt from your more expensive credit cards to a cheaper one.
In most cases, you can use a balance transfer card to take advantage of an introductory 0% interest rate for a certain period of time.
If you can clear your credit card debt within the 0% period of time, then you could save yourself a lot of money not having to pay any interest on your debt.
Are there any catches?
What you need to be aware of is that most balance transfer cards will charge a transfer fee. This is usually between 3 and 5 per cent of the debt being transferred.
You will need to work out how much you will be spending on the transfer fee to make sure the deal is worth it.
You need to be confident that you can pay off your balance before the 0% promotional period expires. Otherwise, you may find yourself paying higher interest charges on your new card than you were on your old card(s).
How do I get a debt consolidation loan?
You can approach your own bank or any high street bank to ask about a consolidation loan.
Remember to do your research to make sure you find a loan that gives you a cheaper interest rate than what you are already paying.
When you find a loan that you like the lender will check to see how much outstanding debt you have and will assess your credit risk.
Should you carry a poor credit history a lender may only be willing to offer you a secured loan. This means that you will have to use the equity in your home as security against the loan.
Your home may be at risk if you take out a secured loan and then go on to default on your loan.
If you are in a position where your outstanding debts are quite low and you have a good credit score, taking out a consolidation loan could help you to reduce your debt and make it easier for you to pay back what you owe.