Loans are taken when personal finances fall short to fund necessary needs. Borrowing becomes an obvious choice at that time. But, one always needs to remember that loans are taken to be repaid. However, sometimes, unavoidable circumstances like job loss, illness, accident etc. befall us and we are unable to pay loan installments further to the borrower.

In case the borrower realises that he can not pay the total outstanding amount he owes to the lender, he may take a logical route of IVA. Though in unsecured loans, the lender doesn't have any property of yours to sell and recover his money. But, he can sue you in a County Court and you may be charged against a CCJ (County Court Judgment). This will invite unnecessary troubles for the borrower.

So, it’s always advisable that once you realise that you can no longer keep up with your unsecured personal loans instalment, tell the lender frankly and offer an IVA. IVA stands for Individual Voluntary Arrangement. Under this, the borrower offers to pay a certain amount that is due to the lender. And, if the lender agrees, then an Agreement will be signed.

Be it secured or unsecured loans, an IVA is beneficiary to both the lender as well as the borrower. This is because the fees associated with the bankruptcy are high and there are very less chances that the creditor gets some money through the borrower's assets. So, it’s preferable for both the borrower and the lender to sign an IVA. A voluntary arrangement in case of unsecured personal loans is a procedure whereby the person comes to an agreement with their creditors in how their debt will be discharged. Such a scheme requires the approval of the court and is under control of a supervisor and insolvency practitioner.

However, if the debtor is still unable to pay the amount he offered to pay on the unsecured personal loans package, the creditor may take a legal action against you which may also result in bankruptcy. So, it’s always advisable to pay the amount decided because this way the borrower pays back only a percentage of his debts and there is no publicity about in the local papers.