Could an IVA lift you out of the small personal loan trap?

When you are running short of cash to cover the cost of a family holiday or a school trip for your kids, you may be tempted to take out a quick and low-amount personal loan to help you get by.

But recent research from Moneyfacts.co.uk found that the annual percentage rate you have to fork out for when you take out a £1,000 loan can almost be as much as the loan itself.

And if you have fallen into the interest rate trap, an individual voluntary arrangement (IVA) is one way you can eventually get yourself out.

An IVA can freeze the interest rate on unsecured personal loans, which could be particularly ideal if you have taken out a number of small loans at different points to see you through and you are now paying the price for relying on credit for small expenditures.

Speaking to the Times, Ms Oakley says a small personal loan seemed like an attractive way to get her hands on some much-needed cash.

But combined with reliance on credit cards, she found herself with a financial headache.

"I was very young when I first got a credit card. I went travelling using one and extra money was always accessible. But there really is more of a feeling now that you need to live only using the money that you earn," she explains.

If your debt reliance goes back a number of years, when credit was easy to get hold of, the economic downturn may have shocked you into sorting your finances out.

One way this can be done is through an IVA. As well as freezing the interest rate on personal loans, an IVA can merge all your balances together so that you pay a single and more controllable amount back every month.