Secured loans and IVAs

How lenders typically treat it

A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.

Can you get a secured loan during an IVA?

Only in limited circumstances. An individual voluntary arrangement is a legally binding agreement with your creditors, supervised by a licensed insolvency practitioner, under which you make affordable payments for a set period, usually five years, and the remaining balances are then released. One of its standard terms is that you must not take on more than £500 of new credit without the supervisor's written consent. A secured loan taken without that consent would breach the arrangement and could lead to it failing, which in turn can lead to bankruptcy. So the practitioner's consent is not a formality; it is the first gate, and no reputable lender or broker will proceed without it.

The second gate is the lender. Most secured loan lenders will not consider an applicant in an active IVA at all. A small number of specialist lenders will, at a low maximum loan to value, at the top of their adverse pricing range, and usually only where the loan serves a purpose that the practitioner supports. Those purposes are covered in the next section, and they are narrower than general debt consolidation. Someone in year two of an IVA who wants to consolidate the arrangement into a loan to reduce their monthly payment is unlikely to find a lender, and unlikely to get consent either.

The third gate is the practitioner's judgement. They act for your creditors as well as for you, and they will only agree if the loan improves the creditors' position or is required by the arrangement's own terms. If you are considering this, speak to your supervisor first, and take free advice from StepChange, MoneyHelper or Citizens Advice, all of whom understand how IVAs interact with borrowing.

What is the IVA equity clause, and how does a secured loan fit it?

Most IVAs entered by homeowners contain an equity clause. In the final year of the arrangement, commonly around month 54, you are required to try to release some of the equity in your home for the benefit of your creditors, usually by remortgaging. The standard terms set limits: the remortgage is normally capped at 85% loan to value, the new payment must remain affordable, and if the amount that could be released is small, commonly under £5,000, the clause does not bite. If you cannot remortgage on acceptable terms, which is common with an IVA on your file, the usual alternative is 12 further months of payments, turning a five-year arrangement into six.

This is where a secured loan most often appears. A remortgage during an IVA is very hard to obtain, but a second charge lender that specialises in this situation may lend the equity sum required by the clause, secured behind your existing mortgage, with the money paid into the arrangement. Your practitioner will have to agree that the terms are acceptable, and the loan payment will need to fit your budget once the IVA payments stop.

The other common purpose is a full and final settlement. If a lump sum can be raised that your creditors will accept in place of the remaining payments, the IVA can be brought to an early close. Some homeowners use a secured loan to fund that lump sum. It only makes sense if the loan payment is comfortably below the IVA payment and the total cost is reasonable, and it needs a creditors' meeting to vary the arrangement.

In both cases the loan is secured on your home. Miss the payments and the lender can seek possession. Replacing an IVA, which cannot take your house, with a debt that can is a serious step, and worth a second opinion from a free debt adviser before you sign anything.

How soon after an IVA can you get a secured loan?

Sooner than most people expect. When the final payment is made your supervisor issues a certificate of completion, your name is removed from the Insolvency Register a few months later, and the arrangement itself ends. The IVA stays on your credit file for six years from the date it started, so after a five-year arrangement it remains visible for roughly another year, and after a six-year one it drops off almost immediately.

Lenders tier from the completion date. A few specialist second charge lenders will consider an application as soon as the certificate is issued, at their lowest loan to value and highest rate. Many more become available once 12 months have passed, often one tier below their clean-credit pricing. By three years after completion, and certainly once the IVA has left your credit file, most lenders treat you close to a standard applicant provided nothing else has gone wrong. Our lender criteria database shows how each lender sets those thresholds.

Two things decide which end of that range you sit at. The first is conduct: every mortgage payment made on time through the IVA and since, no new defaults or judgments, and no missed payments on whatever credit you have used since. The second is your credit file itself, which is often wrong after an IVA. Accounts included in the arrangement should show as settled or partially settled with a zero balance and a default date no later than the IVA start date. It is common to find creditors still reporting balances, or defaults dated years into the arrangement, both of which make you look worse than you are. Get all three reports, and ask the creditors and the credit reference agencies to correct them before you apply.

How much equity do you need, and what does the loan cost?

Equity is the currency here, more so than for any other kind of adverse credit. During an IVA, and in the first year after one, lenders commonly cap combined loan to value at 65% to 70%. On a £300,000 home with a £180,000 mortgage, that leaves £15,000 to £30,000 of possible secured borrowing. The same home at 80% would allow £60,000. Our guide to how much equity you need works through the sums. Affordability applies on top, and with an IVA the lender will look closely at your bank statements to see how you have managed since the payments stopped.

The rate depends on where you are in the timeline. During or soon after an IVA it sits at the top of the adverse range; three years on it can be close to prime. The example below uses the fixed illustrative secured loan rate used across this site, which someone recently out of an IVA should treat as a lower bound.

The example is a post-IVA homeowner who has since built up new card and loan debt and wants to consolidate it. The monthly cost falls from £532 to £190, while the total repaid over 15 years is £34,196 against £20,000 borrowed. At a post-IVA rate the saving is smaller and the total larger, and if you find yourself with £20,000 of new unsecured debt within a few years of an IVA, that pattern deserves a conversation with a free debt adviser before a loan.

Is a secured loan the right move with an IVA in your history?

It can be, in two situations. The first is where the IVA's own terms require equity to be released and a secured loan is the only realistic way to do it, with the practitioner's agreement. The second is where the arrangement is complete, your finances have been stable since, and you have taken on some newer debt that a secured loan would clear more cheaply. In both, the loan should leave you with a payment that fits comfortably, not one that only works if nothing goes wrong.

It is the wrong move where it repeats the problem. An IVA exists because unsecured debt became unmanageable, and it protects your home while you deal with it. A secured loan does the opposite: it puts the home behind the debt. If you do not keep up the repayments on a secured loan, your home may be repossessed, which is a consequence no IVA carries. So a loan to escape an IVA early, or to consolidate new debts built up during one, needs an honest answer to why the debt exists and whether the budget now balances.

Free, impartial help is the place to test that. StepChange and Citizens Advice both advise on IVAs and on what comes after them, and MoneyHelper has guidance on borrowing after insolvency. None of them earn anything from your decision. Our comparison of debt consolidation and an IVA sets out how the two routes differ for homeowners, and if you are still in the arrangement, your supervisor should be your first call.

What improves your chances

• If the IVA is still running, speak to your supervisor before anything else; without written consent no lender will proceed.
• After completion, keep the certificate of completion safe and check your name has come off the Insolvency Register.
• Get all three credit reports and make sure every account in the IVA shows as settled with a zero balance and a default date no later than the IVA start.
• Pay the mortgage and every other commitment on time from completion onwards; the first 12 months of clean conduct move you up a tier.
• Wait for the 12-month or three-year anniversary of completion if it is close, as lender criteria commonly change at those points.
• Give the adviser the IVA start and completion dates, the practitioner's name and your equity figures so the application goes to a lender that fits.

Alternatives worth considering

A remortgage is the other consolidation route, and after an IVA a small number of adverse credit mortgage lenders will consider it, usually at a lower loan to value and once your current deal has ended; our pages on remortgaging during an IVA and after an IVA cover both. If you are inside the arrangement and struggling with the payments, a variation of the IVA through your practitioner, or a switch to a different debt solution, may serve you better than any new borrowing. And if the aim is simply to close the arrangement early, a full and final settlement funded from savings or family help avoids securing anything on your home.