Payday loans and IVAs

When faced with an unexpected expense and no savings to fall back on, payday loans can give you access to the quick cash you need. But if you’re currently in an Individual Voluntary Arrangement (IVA), borrowing can become more complicated.

In this guide, we’ll explore if it’s possible to take out a payday loan with an IVA, and if so, whether or not it’s the right move for you. We’ll also dive into some alternative options, outline responsible borrowing practices, and signpost where you can find additional support.

In this guide: 

• What is an IVA? 
• Can you take out payday loans with an IVA? 
• I’m in an IVA but need a loan: What are my options?
• Payday loans for IVA customers: How to approach borrowing
• Moneyboat’s responsible borrowing
• Where can I seek further support?  

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement that helps someone manage their debts over a longer period (usually between five to six years). In this time, you’ll pay what you can realistically afford until the debt is cleared, or until the IVA term is over.

A third-party Insolvency Practitioner (IP) helps to arrange the IVA and ensure that it works for both parties. While an IVA can offer relief from creditor actions, it may also impose restrictions on your borrowing options.

Can you take out payday loans with an IVA?

So, how do IVAs and payday loans work? Well, with an IVA, your ability to take out new credit, such as credit cards, payday loans, or short-term loans with a direct lender, will often be restricted. Small payday loans for IVA customers may be available from some lenders. However, it’s important to consider:

• You need written permission from your IP to borrow more than £500: Applying for credit without permission will result in a breach of IVA terms, which could terminate the agreement.
• For credit less than £500, you’ll still need to inform the lender about your IVA agreement: Bear in mind that there’s a chance you might not be accepted. 
  

This £500 limit applies to everything from personal loans to overdrafts. It’s put in place to prevent you from taking on excessive debt while paying off current obligations.

Will I be accepted for a payday loan with an IVA?

Some creditors might approve your loan application, but there’s no guarantee. Even with IP consent, obtaining a loan during an IVA can be challenging. This is because an IVA remains on your credit file for up to six years and can negatively impact your credit score.

A bad credit score signals to lenders that you’ve struggled to pay your debts in the past, therefore making you appear a high-risk borrower. This can lead to application rejections, stricter borrowing terms, and higher interest rates.

I’m in an IVA but need a loan: What are my options?

If you’re currently in an IVA and find yourself needing a loan, it’s important to think through your next steps carefully. Taking on new credit during an IVA could put further strain on your finances, so before applying, ask yourself the following:

• Can I realistically afford the loan without missing my IVA payments?
• Is the loan necessary, and have I explored alternative solutions?

If a loan doesn’t seem like the right fit, there are alternative ways to manage unexpected expenses:

• Speak with your IP: They may be able to adjust your payment plan or grant a short-term break depending on your circumstances
• Borrow from family and friends: While this isn’t always a feasible option, borrowing from someone you trust may offer short-term relief without the worry of added interest
• Look into emergency grants and support schemes: Depending on your situation, you may be eligible for local council or government support
• Review your budget: Effective monthly budgeting could reveal areas where you can cut back on spending and free up some extra funds

Looking ahead, the best thing you can do is focus on completing your IVA. Once marked as complete on your credit file, you’ll have the opportunity to rebuild your credit score and regain access to better borrowing options.

Payday loans for IVA customers: How to approach borrowing

Borrowing with an IVA isn’t impossible, but it should only be done with full permission and careful consideration. You’ll need to get written permission from your IP, even for small amounts, and make sure you understand the full cost of your loan (including interest and fees).

Next, ensure that you’re upfront with your lender about the IVA agreement, allowing them to accurately assess your ability to repay. Most importantly, check that any new borrowing commitments won’t interfere with your IVA payments.

Moneyboat’s responsible borrowing

As a responsible direct lender, we’re authorised and regulated by the Financial Conduct Authority (FCA). This means we follow strict affordability guidelines to help protect our customers. Here’s a quick look at our minimum lending requirements:

• Full or part-time employment
• A minimum NET pay of £1000 per month
• Holder of a UK bank account and debit card
• At least 18 years old

When you apply for a short-term loan with Moneyboat, we also check that you’re in a comfortable position to make repayments, and that you don’t have a history of significant problems with debt.

These thorough affordability checks are crucial, allowing us to ensure that you’re a good fit for the product. For more on this, you can dive into our full payday loan eligibility criteria guide.

Where can I seek further support?

If you’re unsure about your next steps or feel like your debts are becoming unmanageable, there are multiple organisations that offer free, independent support. These include:

• Citizens Advice: Offers help with everything from debt to budgeting queries, either face-to-face or online.
• Stepchange: A leading UK debt charity.
• Debt Advice Foundation: Provides people with one-on-one debt advice.
• National Debtline: An independent debt advice charity available to talk to over the phone or on online chat.

So, there you have it: a roundup of some key insights on IVAs and payday loans. Navigating your finances while in an IVA can be complicated, but that doesn’t mean you’re out of options.

The most important thing is to stay committed to your IVA by making regular payments on-time. This will allow you to work towards a more financially secure future with more borrowing freedom.

If you found these insights helpful, you can head over to the rest of the Moneyboat blog for plenty more. There you’ll find guides on debt consolidation as well as how to ask for breathing space with debt.