IVA’s are simple enough – you take all of your debts, give them to one company who will deal with your creditors, make them an offer of what you can afford and you pay that back for a certain time (usually five years) and then the rest of the debt is written off. You will be asked to prove that your monthly outgoings are more than your you are earning.
There are usually conditions, such as a minimum total amount owed, the number of creditors you owe money to and a minimum monthly amount you can afford to pay back before you are accepted. However, once the five years are over and the rest of your debt is settled, you will have a permanent record of not settling your debts on your credit history, which will cause major problems for securing any credit in the future.
There are other qualifying conditions to IVA’s that are beyond your control. At least 75% of the creditors have to agree to your IVA-managed proposal, which will be discussed with you by an Insolvency Practitioner. The creditors are also unlikely to accept less than a quarter of the original amount borrowed before considering any such proposal.
Payday loans take a lot more work, but could end up saving you money and actually help you repair your credit rating. Firstly, take all of your outgoings and forecast when each one leaves your account each month and project your cashflow to coincide with these payments. You may find that, with budgeting, you only need a small amount to make up the difference that you are falling short. You may find that some creditors do not mind when in the month they get their money, as long as they do.
Make the payment as late in the month as possible and take out a instant cash loan to cover you for the shortest period to help save on any interest you accrue whilst you owe money. Take the loan out – only for the amount you need for the difference between what you have and what you owe – pay the last outstanding debt, the repay the instant cash loan as soon as you are paid – you may find that there is only £20-£30/month interest each month, by doing it this way. You then retain the low interest rates on the low APR loans and they are paid off with the least expenditure possible – you may even be able to over pay on the higher interest loans when you have paid some of the smaller ones off, to reduce your term and amount by even more, really putting a few ticks back next to your credit rating.