Secured Loans With An IVA: What Homeowners Need to Consider

At a glance

• An active IVA can significantly restrict new borrowing and lender choice.
• Your IVA terms may require permission before taking additional credit.
• A secured loan should not be used to bypass an IVA or creditor protections.
• Any borrowing is subject to lender criteria, affordability checks and status.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

An Individual Voluntary Arrangement (IVA) is a formal insolvency arrangement with creditors supervised by an
insolvency practitioner. For homeowners, an IVA can contain specific provisions about property equity and
additional borrowing. Anyone considering a secured loan, homeowner loan or second charge mortgage during
an active IVA should first understand the IVA terms and obtain any consent required.

Terminology: secured loan, homeowner loan and second charge mortgage

In the UK homeowner market, the expressions secured loan, homeowner loan and second charge mortgage
are commonly used for borrowing secured against a property where an existing first mortgage remains in place.
The precise legal and regulatory treatment depends on the agreement and circumstances, so product
documentation should always be checked.

Can you borrow during an active IVA?

Many IVAs restrict the amount of additional credit that can be taken without the insolvency practitioner’s
permission. A secured lender will also have its own policy on active IVAs. The existence of property equity does
not mean a new mortgage can automatically be arranged.

Speak to the insolvency practitioner first

The supervisor can explain the restrictions in the IVA and whether the proposal interacts with any equity-release
clause. Borrowing without required consent could breach the arrangement. The adviser and lender should also
be given accurate information about the IVA rather than trying to structure around it.

After an IVA has completed

A completed IVA can remain relevant to credit underwriting for a period and lender policies vary on how soon
after completion they will consider an application. The lender may ask for the completion certificate and evidence
of subsequent account conduct.

Consider the purpose and risk carefully

Using a second charge to repay debts connected with an IVA requires particular care. Securing debt against the
property changes the consequences of non-payment and may create a long-term mortgage commitment.
Independent debt advice may be more appropriate where the borrower remains under financial pressure.

Potential benefits and points to weigh

Potential reasons a homeowner might consider this route include access to property-backed borrowing, the possibility of keeping an existing first mortgage in place, and – depending on the product – a longer repayment term or larger loan than some unsecured alternatives. These are not benefits for every borrower and must be judged against the actual offer available.

Property risk: the borrowing is secured on the home, so failure to maintain repayments can ultimately lead to
Total cost: a lower monthly payment can result from a longer term and may mean paying more interest
Fees: lender, valuation, legal and intermediary fees may If fees are added to the loan, interest may be charged on them.
Future flexibility: another charge can affect later remortgaging, moving home or raising further
Eligibility: no amount, rate or approval is guaranteed; decisions are subject to lender criteria, affordability checks and status.

Comparing cost: APRC, fees and total repayable

APRC (Annual Percentage Rate of Charge) is designed to show the overall annual cost of mortgage borrowing over the full term, using the assumptions required by the mortgage rules. It takes account of the interest rate and relevant charges included in the calculation. Some costs may be excluded if they are not known to the lender, so the APRC should be considered alongside the monthly payment, total amount repayable, fees and the loan term.

A useful comparison therefore looks beyond the initial interest rate. Review the mortgage illustration or ESIS, the monthly installment, all fees, whether fees are paid upfront or added to the balance, the term and the total amount repayable. If a variable rate applies, consider how payments could change.

Credit searches and eligibility checks

An initial eligibility check may use a soft credit search, which is not visible to other lenders and does not affect your credit score. A formal credit application will usually involve a hard search, which is recorded on your credit file and can be seen by other lenders. Processes vary, so check what type of search will be used before proceeding.

If debt consolidation is involved

Consolidating existing debts into a secured loan may extend the repayment term and increase the total amount of interest payable over time.

Consolidation can simplify several payments into one, but it can also turn previously unsecured credit into
mortgage debt. The comparison should include current balances, existing interest rates, remaining terms, any
settlement costs, the new secured-loan fees and the total amount payable over the new term. Where a customer
is already in payment difficulty, alternatives such as speaking with existing creditors or obtaining free debt advice
may need to be considered.

Worked example

Example: A homeowner in an active IVA has substantial property equity and wants to borrow £25,000. The first
question is not simply whether the LTV works. The IVA terms may restrict new credit and may already contain
provisions governing equity. The homeowner should therefore speak to the insolvency practitioner before progressing
to a mortgage application.

What an adviser should consider

An FCA-authorised mortgage broker or adviser, like Dragon Finance can compare the available routes in the context of the homeowner’s income, expenditure, property, existing mortgage, credit profile and objectives. Appropriate advice should consider relevant alternatives rather than focus solely on whether a particular second charge is available. Speaking to an adviser does not oblige a homeowner to proceed, although consumers should check at the outset whether any advice or broker fee could become payable and at what stage.

Frequently asked questions

Can I get a secured loan while my IVA is active?

Possibly in limited circumstances, but lender choice can be very restricted and the IVA may require your
insolvency practitioner’s permission.

What happens after my IVA finishes?

Some lenders may consider an application after completion, but timing, credit history and affordability will affect
the options available.

Can a secured loan be used to settle an IVA early?

This can be complex and should only be considered with the insolvency practitioner and appropriate regulated
advice. It is not automatically suitable.

Will an eligibility check affect my credit score?

A soft eligibility check does not affect your score, but a formal application will usually create a hard-search
footprint.