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Debt Management or IVA?

With so many debt solutions available many people find themselves debating between options like an IVA or Debt Management Plan. Both options can be effective ways to clear your debt.

How does a Debt Management Plan work in comparison to an IVA?

Both debt solutions have similarities. The main difference is that an IVA is legally binding, whereas a debt management plan isn’t.

The idea behind an IVA and debt management plan is to make an agreement with your creditors to amke lower affordable monthly repayments. As mentioned an IVA is legally binding and will also freeze interest but probably the biggest difference is that with an IVA your creditors will write off the debt you can't afford to pay.

Legally binding IVA vs. non-binding Debt Management Plan

With a legally binding agreement, you know where you stand and you’re protected from your creditors changing their mind. A non-binding agreement means your creditors can change their mind at any stage.

Are there any other differences?

When you opt for an IVA you will have the opportunity to wipe off a portion of your debt, whereas a debt management plan also aims to make your payments more affordable, but it won't write any debt off. Also, keep in mind as it is not legally binding, they could change the terms.

With an IVA, you also know it will typically last five years, whereas it can take you far longer to repay a debt management plan as there is no fixed end date.

Whether you opt for an IVA or debt management plan make sure you read the terms with a debt management plan. Shop around to make sure you aren’t getting charged rolled up interests and large fees that will only make your repayments harder.

IVA or Debt Management Plan: which one is better?

The best solution for you will depend on how much you owe and your income. If you owe above £15,000 then an IVA may be the best option. It’s best to speak to a professional before you start an IVA or debt management plan. Click to find out how to arrange an IVA and also how to get some confidential advice to help you get out of debt.