Brits naive about IVAs

New research from moneysupermarket.com reveals Brits’ naivety about Individual Voluntary Arrangements.

In a worrying admission, almost half (49 per cent) of the population said they didn’t know what an IVA was. Given the current levels of advertising and the growing national concern over debt levels, it is staggering to learn how many people do not fully understand IVAs. Government figures show there were 11,105 IVAs taken out in England and Wales between April and June this year – an increase of 35 per cent on the previous quarter. But do Brits know what they are signing up for?

Tim Moss, head of debt at moneysupermarket.com, said: “For people suffering from spiralling debts, an IVA might seem like an ideal escape route. However, an IVA is not something that should be entered into lightly and without considered thought. It is a serious financial agreement with creditors that will typically last five years. Once entered into, it will make obtaining any forms of credit, even for such everyday items as a mobile phone contract, almost impossible.”

More than half of people say they would consider getting an IVA if they were in serious debt. However, two in five (40 per cent) did say this would be only as a last resort, with just one tenth (11 per cent) thinking that IVAs are perfectly acceptable. Just 16 per cent say IVAs are an unacceptable solution to debt problems.

Nearly one tenth (nine per cent) of the population think that IVAs help alleviate debt and should be more widely available, with a further 17 per cent saying they are a good alternative to being declared bankrupt. This would indicate many Brits do not understand the true consequences of taking out these arrangements and might believe IVAs are a magic cure for people’s debt worries.

Tim Moss added: "There are many simple and practical steps people can take to get to grips with their financial situation before taking a drastic step such as declaring bankruptcy or entering into an IVA. People should first seek debt advice from one of the free advice agencies such as the Citizens Advice Bureau, then cut their excess spending and look to switch their debts to lower interest rate products to save some much needed money. Where circumstances allow, they could consider taking on part-time work to bring in extra cash.”

The youngest age group are the least aware – 64 per cent of 18 to 24 year olds were unable to say what an IVA was.

Men have a better grip on IVAs – just 42 per cent said they didn’t know what an IVA was, compared to 56 per cent of women.

Nine per cent of Brits think IVAs serve a purpose but are too readily available and should not be publicised as heavily as they are.

12 per cent think IVAs are a way of encouraging people to get into debt.