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People entering IVAs `without understanding terms`

25/03/2008

Many people entering Individual Voluntary Arrangements (IVAs) do not read the small print and understand all the terms and conditions before they sign an agreement, it has been claimed.

A report by the Thrifty Scot has found that some people applying for an IVA do not realise there is a clause in the agreement which requires them to use the equity in their homes to repay some of the debt in the final year of the settlement.

As a result, many consumers are having to seek professional mortgage advice before applying for an IVA.

An industry official told the news provider: "Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime - that is to say as riskier borrowers who need to be charged more to compensate for that risk."

IVAs are formal agreements between the debtor and creditors in which a portion of the debt is agreed to be paid over a five-year period. Any debt unpaid after that time is written off.

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