v Is an IVA better than a Consolidation Loan?

Is an IVA better than a Consolidation Loan?

If you're experiencing financial difficulties and are assessing your options, a consolidation loan might be high on you list. But don't discount the option of an IVA, because there are circumstances where an IVA could provide a more suitable solution.

Whilst at first glance the solutions may appear to be similar and share many of the same attributes, fundamentally, they are very different.

Personal Circumstances

Which option is best for you will be heavily influenced by your personal circumstances. You should, therefore, take time to understand each option, to ensure you come to an informed decision.

Here are a list of the main differences between an IVA and a consolidation loan.

Duration or term

Loan: The duration of a consolidation loan will be determined by how much you borrow against how much you can afford to repay each month. The maximum duration for an unsecured consolidation loan is 10 years.

IVA: An IVA has a fixed duration of, normally 5 years, after which the IVA is satisfied. Any debt left unpaid at this point is written-off under the terms of the IVA.

Debt write-off

Loan: There is no debt write-off with a consolidation loan. The full debt must be repaid.

IVA: Any outstanding debt remaining after the fixed term has completed must be written-off by creditors.

Credit rating

Loan: Taking a loan has no negative impact on your credit rating, unless you are unable to maintain the payments.

IVA: Entering into an IVA has a severe impact on your credit rating for 6 years.


Loan: A consolidation loan is a legally binding contract. If your outstanding balance is greater than £750, failure to maintain payments can result in legal action being taken against you which could, ultimately, lead to you being made bankrupt.

IVA: An IVA has a degree of flexibility if payment problems occur. A payment break can be given by the Insolvency Practitioner, if deemed necessary, or they could reduce your IVA payments by 15% without the need for creditor approval.

Fees and Costs

Loan: All interest and administration costs are built into the loan repayments and paid for by the borrower.

IVA: All IVA fees are deducted out of the monthly IVA payments and, in most circumstances, are borne by the creditors.

Debt levels

Loan: Unsecured loans are normally capped at £25,000 per person.

IVA: There are no limits to the amount of unsecured debt that an IVA can absorb.


Loan: Repayments to a consolidation loan are offer by the creditor based on the amount required each month to repay the debt over a given duration. The borrower must assess whether they can afford the repayments for themselves, before they accept the agreement.

IVA: Payments are set to what is deemed to be affordable to the applicant and no higher.


Consolidation Required £25,000 : Term 60 Months : Monthly Payment £560 : Total Repaid £47,040 : Debt Write-off £0

Total Debt Problem £25,000 : Term 60 Months : Minimum Payment £193 : Total Repaid £11,600 : Debt Write-off £13,400

Take Professional Advice

If this article has given you food for thought, then perhaps you'd like the chance to have a private conversation with one of our professional debt advisers.

Simply call 0800 088 7502 to speak to us now or, alternatively, complete the form below and one of our adviser will call you back at your preferred time.

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