Money Advice, Debt Advice & Debt Help
Can a Guarantor Loan be Included in an IVA

Can a Guarantor Loan be Included in an IVA

Can a Guarantor Loan be Included in an IVA

Many people facing debt problems have Guarantor Loans as they can be easier to get than other forms of credit. But if you struggle to repay the loan can it be written off with an IVA?

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How Guarantor Loans work

A Guarantor Loan is when you borrow money on the basis that if you cannot pay the debt back, your guarantor will pay it for you. People facing debt problems often have these loans because they are easier to get if you have a low credit score or have been refused credit.

The guarantor can be anyone, but often is a friend or family member. The guarantor must be able to pay your monthly repayments. If you cannot pay, the lender can and will pursue them to recover the debt.

Having a lower credit score partly protects you from borrowing money you cannot afford to repay. Guarantor loans can create problems if you can’t really afford the monthly repayments or have other debts to pay as well.

Guarantor loans that go wrong can create pressure and upset between families and friends. If you already have unaffordable debt, take debt advice before taking one of these loans.

Including guarantor loans in an IVA?

If you already have a Guarantor Loan you should understand it is just another unsecured debt. In an IVA  all of your unsecured debts are included in the arrangement. A guarantor loan is an unsecured debt so it can be included in the arrangement.

You will be protected from all your creditors. Your creditors cannot pursue you for the debt during or after the IVA has finished, which brings great peace of mind.

However when you start the IVA, your guarantor will have to start making the normal agreed payments for you. If they cannot pay the monthly payments, creditors can take enforcement action against them to retrieve the debt in full.

An IVA will protect you, but not your Guarantor. Your Guarantor will find out about your debt problem and must be prepared to pay the debt for you. If they cannot pay, they may end up having to take debt advice themselves.

Can you pay the Guarantor Loan separately?

You may not want your guarantor to find out about your debt problem. Paying them separately might be favourable so the guarantor does not have to pay the debt for you. Unfortunately you will not be able to do this in an IVA.

In an IVA all your unsecured debts will be treated the same way. You cannot favour one over another. In the living expenses budget created in your IVA you would not be allowed a separate amount to pay the guarantor loan. The other creditors would simply reject your IVA application.

You could try to continue to make payments from your agreed living expenses budget. However this is not advisable – the likelihood is you would not have enough money each month to pay for normal home expenditure and your IVA payment.

The Guarantor will find out about your debt problem if you do an IVA. The only alternative is if you can pay off the Guarantor Loan before you start the IVA with the rest of your creditors.

Can a Guarantor do an IVA?

If you are an guarantor for someone else’s debt and have other debts of your own that you cannot afford to pay, you can still apply for an IVA. You would have to include the debt along with your list of creditors and it would become part of your IVA.

Normally if the if the person responsible for the loan stopped making payments, the loan company would pursue you (the guarantor) for the debt. Your IVA would however protect you in this instance. The loan company may be paid some of the debt back through your IVA, along with your other creditors.

Your IVA will protect you, but will not protect the person who originally took out the loan. The loan company could take enforcement action against them to retrieve the debt.

If it is a friend or family member that you are the Guarantor for, check that they are still able to pay the loan payments before you decide to start an IVA. Once in an IVA you will no longer provide the ‘back up’ if they cannot pay.

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    4 thoughts on “Can a Guarantor Loan be Included in an IVA

    1. Jez says:

      I want to ask: If I’m a guarantor – can I include it in IVA?

      1. Hi Jez.

        If you are a guarantor for someone else’s loan but you are thinking about starting an IVA to manage your debts you must include this loan in your IVA as well. This way if the person who took the loan stops paying it then it is already included in your IVA and there will be no problem. If you did not do this then your IVA could be at risk if they stop paying as you will then become liable for the new debt.

        Adding the debt to your IVA will not affect the person who took the loan in any way. They must continue to make the payments as normal. All you are doing is protecting yourself in case they stop paying in the future.

    2. Ben says:


      I am a grantor for a friend and she has gone into an IVA. When they set it up I was told I wouldn’t have to pay. I ha e spoke to someone dealing with her account and they said I didn’t need to pay. Now I am getting letters and I have looked on line. Looks like we were miss informed. Do I need to pay?

      1. Hi Ben

        I am afraid your friend has been given the wrong advice by their IVA company. If a guarantor loan has been included in their IVA, the guarantor (i.e. you) will certainly now be liable for the debt. As such the guarantor loan company is perfectly within their rights to come after you for the money. You will to pay the monthly payments from now on or face legal action yourself.

        Once you have paid the loan the money your friend is paying into their IVA will remain the same. The other creditors will just end up getting paid more of their debt back.

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