Consumers entering into an individual voluntary arrangement (IVA) should be aware that it still requires disciplined payments, an expert has advised.
As a legal contract between customer and creditor, an IVA allows debts to be cut to an affordable level which can then be paid off over a fixed period.
Consequently, an increasing number of people are turning to them in order to freeze the interest on
personal loans and
credit cards.
However, a financial expert has pointed out that insolvency should not be taken lightly, as it still requires discipline to make structured payments.
Chris Tapp, director of Credit Action, commented: "It is an agreement that works through a number of years, and you do have to keep making payments towards your debt, at the end of which the rest is written off."
He added that anyone considering an IVA should be aware that they are often only available to those who have some form of regular income.
A recent study conducted by Sainsbury's Finance revealed that
personal loans are now being used significantly less for the purposes of debt consolidation than they were two years ago.
