Can I get a basic bank account if I have an IVA?

23 April2021

As with all approaches to debt problems, entering an IVA (Individual Voluntary Arrangement) comes with some downsides - as well as its advantages.

Insolvency will have a serious impact on your credit rating, which can affect other areas of your finances as a result, including your banking options.

Here we'll look at how an IVA will affect you and the type of bank account you would be able to get while an IVA is running.

What is an IVA?

An IVA is the common term for an Individual Voluntary Arrangement: a formal insolvency solution that could be agreed with your unsecured lenders.

IVAs are designed to help borrowers who have a substantial amount of unsecured debt which they can't afford to repay in a realistic timeframe.

How does an IVA work?

If you agree an IVA with your unsecured lenders, you'll commit to making regular monthly payments that you can afford. These payments will be calculated to fit around all your basic living costs - rent/mortgage, food, bills, etc. - so you should be confident that you're paying no more towards your debts than is realistic for you.

Your lenders will agree not to take any further action against you - and as long as you stick to your side of the arrangement, they'll write off whatever remaining debt you couldn't afford to pay back once your IVA successfully finishes.

If your IVA lasts for the typical length of time, the debt write-off will happen after 5 years.

If you're a homeowner, you should be able to stay in your home - although you may have to release some of the equity.

You could fill in our quick form to find out if you might qualify for an IVA.

How will an IVA affect my banking options?

Entering an IVA will affect your credit rating for six years from the day it begins.

Along with making it unlikely that any applications you make for further credit during this time will be successful (even if your IVA has finished), a poor credit rating will also have an impact on your banking options.

If you're looking to open a standard current account on the High Street and you're currently on an IVA, it's likely your application will be rejected, as bank account providers will typically see this as too much of a risk.

However, there is an alternative option that could help you in this situation. Basic bank accounts, though not usually advertised by the major banks, can help people with damaged credit scores, as long as they can prove they're UK residents.

If you're on an IVA and you want to get a bank account, you should speak to basic bank account providers to see if you can open an account.

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Tags: debt, credit rating, banking, basic bank account, IVA, money

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