How an IVA Affects Your Ability to Borrow
An IVA is one of the more serious forms of adverse credit, and it affects your borrowing prospects in several important ways:
Credit file impact: An IVA is recorded on your credit file for six years from the date it was registered, regardless of whether it is completed or still active. This means that even after you have fulfilled all the terms of your IVA and received your completion certificate, it may still be visible to lenders for some time. Most mainstream lenders will automatically decline applications from borrowers with a recorded IVA, whether active or recently completed.
Restrictions on borrowing during an active IVA: The terms of most IVAs include a restriction on taking on new credit above a certain threshold, typically £500, without the written consent of your Insolvency Practitioner (IP). This means that even if a lender were willing to approve your application, you would need your IP's permission before proceeding. Taking on new debt without this consent could be considered a breach of your IVA, potentially leading to its failure and the reintroduction of your original debts.
Lender perception: From a lender's perspective, an IVA indicates that you have previously been unable to manage your debts to the point where a formal insolvency arrangement was necessary. This makes you a higher-risk borrower in their eyes, which is reflected in higher interest rates and stricter terms if you are approved.
Combined effect with other adverse credit: An IVA rarely exists in isolation. It is common for applicants with IVAs to also have associated adverse credit markers such as defaults, missed payments, or CCJs that were part of the debt problems leading to the IVA. Lenders assess the full picture, so the severity and recency of all adverse credit matters.
Despite these challenges, the secured loan market includes lenders who specialise in working with borrowers who have experienced financial difficulties, including those with active or recently completed IVAs.
Getting a Secured Loan During an Active IVA
If your IVA is still in progress, obtaining a secured loan is more difficult but not always impossible. There are specific circumstances in which it may be considered:
Permission from your Insolvency Practitioner: This is the critical first step. Your IP must give written consent for you to take on additional borrowing. They will typically only agree if the new borrowing serves a clear purpose that does not undermine the IVA, such as essential home repairs or preventing the loss of your property. Borrowing to fund discretionary spending or to consolidate debts that are already included in the IVA is unlikely to be approved.
Legitimate reasons for borrowing: Lenders and IPs are most likely to support secured loan applications where the funds are needed for purposes such as urgent property repairs (for example, a failing roof or structural issues), preventing repossession by clearing mortgage arrears, or funding essential adaptations to the property for health or disability reasons.
Lender availability: Only a small number of specialist lenders will consider applications from borrowers with active IVAs. These lenders have higher risk thresholds and charge correspondingly higher interest rates. The rates you can access will depend on the equity in your property, the amount you need to borrow, how far through your IVA you are, and your overall financial situation.
Equity requirements: Because lending to someone with an active IVA carries significant risk, lenders typically require a substantial amount of equity in the property. A low combined LTV provides the lender with a larger safety margin if the property were to be sold.
It is essential to be transparent about your IVA throughout the application process. Failing to disclose an active IVA would constitute fraud and could result in the loan being called in, the IVA failing, and potential legal consequences.
Getting a Secured Loan After an IVA Has Completed
Your options improve once your IVA has been completed and you have received your completion certificate, though the IVA will remain on your credit file for the full six-year period from registration. The longer ago the IVA was completed, and the more time that has passed since it was registered, the easier it becomes to access secured lending.
Immediately after completion (IVA still on credit file): At this stage, your options are still limited to specialist lenders who work with adverse credit applicants. However, the fact that the IVA is completed and you are no longer making IVA payments frees up disposable income, which improves your affordability position. You also no longer need IP consent to borrow.
One to three years after completion: As more time passes, your credit profile gradually improves, particularly if you have been managing your finances well and making all payments on time. More lenders may be willing to consider your application, and rates may start to come down.
After the IVA drops off your credit file (six years from registration): Once the IVA is no longer visible on your credit file, your options expand significantly. You may be able to access near-mainstream rates, provided the rest of your credit file is in good order. However, some lenders ask whether you have ever had an IVA, regardless of whether it still appears on your credit file, so full disclosure remains important.
Building your credit profile post-IVA: Actively rebuilding your credit after an IVA can help you access better rates sooner. Steps include ensuring you are on the electoral roll, using a credit-builder credit card responsibly, paying all bills on time, and avoiding further applications for credit that you are unlikely to be approved for, as declined applications can further damage your score.
