How an IVA limits new credit
An Individual Voluntary Arrangement is a legally binding agreement under the Insolvency Act 1986 in which a person repays part of their unsecured debts over a fixed period, usually five or six years, supervised by a licensed insolvency practitioner.
Most IVA proposals follow standard terms that prohibit taking new credit above a modest limit, commonly £500, without the supervisor's permission. The limit protects creditors who accepted reduced payments on the basis that the debtor would not build up fresh debts.
Why lenders rarely approve applications
Every IVA is entered on the public Individual Insolvency Register and recorded by the credit reference agencies for six years from the approval date. Mainstream lenders see the entry immediately and usually decline, while those that accept it tend to charge very high rates.
Applicants must also answer honestly when a lender asks about insolvency arrangements. Hiding an active IVA to obtain credit can be treated as obtaining credit dishonestly and gives the supervisor grounds to report a breach to creditors.
Who might still need extra money
People most often look for a loan during an IVA after a car breakdown needed for work, a boiler failure, a new baby, a drop in overtime or redundancy. Each of these events has a recognised route inside the arrangement itself.
Self-employed people whose income varies from month to month are especially exposed. Their IVAs often include annual income reviews, and a poor trading year can justify a reduced contribution rather than a business loan that the supervisor would be unlikely to accept.
What counts as credit under the terms
Credit includes personal loans, credit cards, buy now pay later, overdrafts, car finance and catalogue accounts. Mobile phone contracts and utility accounts are treated differently in some arrangements, so the wording of the specific proposal and any supervisor guidance should be checked.
Legitimate options during an IVA
The table sets out routes that keep the arrangement intact. Several of them involve no borrowing at all, which is often the most realistic answer while the IVA is running and payments are being monitored every month.
| Option | What happens | Main condition |
|---|---|---|
| Supervisor consent for small credit | Written permission for an essential purchase above the limit | Clear reason, affordable repayment, honest disclosure |
| Variation of the IVA | Creditors vote on reduced payments after a lasting income change | Supporting evidence and a creditors' decision |
| Payment break | Contributions paused for a set number of months | Allowed by the terms; IVA may be extended |
| Credit union loan | Small loan from a member-owned lender | Supervisor approval still needed above the limit |
| Local welfare or charitable grant | One-off help with essentials such as appliances | Eligibility set by council or charity |
Costs and UK rate caps
Under FCA rules, high-cost short-term credit is capped at 0.8 percent per day, with a £15 limit on default fees and a total cost cap of 100 percent of the amount borrowed. Credit unions in Great Britain are limited to 3 percent per month.
Guarantor and logbook loans aimed at people with poor credit can still cost several times the sum borrowed. Inside an IVA, those repayments compete directly with the monthly contribution, which increases the risk of arrears and eventual failure.
Rights when circumstances change
The supervisor must consider reasonable requests for a variation and present them to creditors. Debtors are entitled to clear figures, annual reviews and an explanation of any fees taken from contributions, and complaints can be escalated to the insolvency practitioner's licensing body.
Windfalls and equity
Most IVA terms require lump sums such as inheritances, lottery wins or large bonuses to be paid into the arrangement. Homeowners may also be asked to release equity near the end, which is another reason to avoid secured borrowing in the meantime.
Steps when you need money during an IVA
The order below reflects how debt advice charities usually recommend handling a shortfall. It protects the arrangement first and only considers credit with permission and at a cost that the household budget can clearly carry.
- Read the borrowing clause in your IVA proposal and note the exact limit.
- Contact your supervisor in writing, describe the problem and ask about a payment break or variation.
- Check entitlement to Universal Credit budgeting help, council welfare schemes and charitable grants.
- If credit is still needed, ask the supervisor for written consent before applying.
- Compare a credit union loan with any other offer by total amount repayable.
- Keep copies of every message and update your budget once repayments start.
Warning signs aimed at IVA debtors
Lenders and brokers sometimes market directly to people in insolvency arrangements. The signs below indicate a product or company to avoid, whatever reassurance is offered on the phone, by email or in social media messages from the company.
- An upfront arrangement or insurance fee requested before a loan is approved.
- Advice to leave the IVA off an application or to borrow in a relative's name.
- Offers to cancel or write off the IVA quickly for a fee.
- Brokers not listed on the FCA register or using a cloned registration number.
- Doorstep lenders with no FCA authorisation, which are illegal money lenders.
What a failed IVA means
If the supervisor issues a certificate of failure, creditors regain the right to pursue the full balance, interest may be added again and the supervisor may petition for bankruptcy. Unauthorised borrowing is one of the recognised reasons for failure.
Credit after completion
Once all contributions are paid, the supervisor issues a completion certificate. The register entry is then removed, while the credit file entry remains until six years after the start date, after which rebuilding credit with small, manageable accounts becomes more realistic.
Can I borrow £500 or less during an IVA?
Many standard terms permit small credit up to £500 without permission, but the exact figure and conditions depend on your proposal. Even within the limit, missed repayments can harm the arrangement, so checking with the supervisor first remains sensible.
Can a family member lend me money?
An informal family loan is not usually treated like commercial credit, but repaying it from income needed for contributions can cause problems. A written note explaining the purpose, amount and repayment plan, shared with the supervisor, avoids later disputes.
Will my supervisor say yes to a car loan?
Consent is more likely when the vehicle is essential for work, the cost is modest and the repayment fits the existing budget. Supervisors typically ask for quotes, insurance costs and evidence of why cheaper transport cannot meet the need.
Is it better to end the IVA early?
Ending an IVA early normally requires a full and final settlement accepted by creditors, often funded by a lump sum from family. Debt advice charities can explain whether this, a variation or bankruptcy suits the situation better than new borrowing.
Useful organisations and resources
- StepChange IVA FAQs — Answers to common questions about payments, windfalls and changes during an IVA.
- StepChange: redundancy and IVA — What to do when income falls during an arrangement.
- StepChange: IVA and mortgage — How homeowners are treated, including equity release clauses.
- ClearScore: what is an IVA — Credit file perspective on IVAs and their effect on future borrowing.
Official and legal references
- StepChange: credit and loans on an IVA — Debt charity guidance on borrowing limits and supervisor consent during an IVA.
- StepChange: how can an IVA fail — Explains breaches, failure certificates and their consequences.
- StepChange: Individual Voluntary Arrangement — Overview of how IVAs work, eligibility and duration.