If you’re planning on obtaining an IVA or if you are already on an IVA, it’s normal to have thousands of questions. Among these, one question that you may wonder about is IVA car finance. Many people question whether purchasing a new car using a financing option when you’re on an IVA is possible.
Even though obtaining credit is a difficult task when you’re on an IVA, it is not impossible. So if you find yourself wrestling with questions like “Can I get car finance with an IVA?” or “How long after an IVA can I get car finance?”, then you’ve come to the right place.
In this comprehensive guide, we unravel the intricacies of securing car finance amidst the challenges an IVA presents and much more. So, let’s rev up the engine and speed through this puzzling territory together.
Table of Contents
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legal framework designed to help people manage overwhelming debt. It enables you to negotiate a feasible repayment plan with your creditors.
You can do this by:
At the end of your IVA, which is usually six years, any leftover debt will be written off. Eventually, your credit score will start to improve.
Having an IVA is proof that you are dedicated to improving your credit. But keep in mind that once you’re on an IVA, certain things like getting car finance will be tough. In this case, you will need to find a company that offers finance to individuals who are on IVAs.
How Do IVAs Work?
In order to qualify for an Individual Voluntary Arrangement (IVA), you should:
During the process of an IVA, you will also have to pay a setup fee and a handling fee. Also, be prepared to provide information on your:
- Financial situation
- List of creditors
If at least 75% of your creditors agree to the IVA, then the IVA will be approved. Once the creditors provide their approval, it becomes legally binding. However, IVAs don’t cover all types of debts. Some debts that it doesn’t cover include:
- Student loans
- Magistrates court fines
- Child maintenance
- Certain car finance types
A list of debts that IVAs do cover include:
- Personal loans
- Catalogue debts
- Council Tax arrears
- Mortgage shortfalls
- Credit cards
- Overdue taxes
- Hire purchase debt
If you want to know if you’re eligible for an IVA, don’t hesitate to fill out our online form. We provide personalised debt help based on your unique financial situation. Reach out, and we will help you find a path that suits your situation. If you don’t believe an IVA is suitable for you, there are alternative debt solutions in the UK that you can take up.
However, if you believe an IVA is suitable for you and want to know more about how it may impact your ability to get car finance in the future, read our next section on IVA car finance.
Can I Get Car Finance With an IVA?
Even though getting car finance with an IVA is tricky, it is not impossible. You can apply for car finance even when you’re on an IVA. But getting it approved will be difficult.
The main reason for this is because they may consider you as a high-risk candidate because you have missed payments in the past. Despite this, there are some lenders who specialise in IVA car finance. But keep in mind that they may have high-interest rates. If this rate is something you can manage while being on an IVA, then you don’t have to worry about it.
You may question why lenders as such may offer IVA car finance, knowing it’s risky. The reason is that they specialise in this area. So they understand your situation and tailor loan packages that you can actually pay off without jeopardising your IVA. But keep in mind that in order to be eligible for car finance with an IVA, you should meet certain criteria.
To apply for IVA car finance with these niche providers, the criteria you should meet include:
- Stable monthly income (preferably over £1,000)
- Age between 20 and 75
- A full UK driving licence
- Documentation like bank statements, pay slips or tax returns.
Before a lender offers car finance to a person who is on an IVA, the first thing they will ask for is a letter that provides permission. So, before you seek car finance, you should get a letter from your IVA supervisor.
This letter should confirm that a new car finance plan won’t mess with your IVA. Without this letter, you won’t be able to get your car finance approved by the lender.
After getting approval from your IVA supervisor and the lender, the next step is the application process. The application process usually involves filling out some forms and providing the required documentation. You might even get pre-approval online.
How Long After an IVA Can I Get Car Finance?
Usually, an IVA will stain your credit file for six years. After this period, getting car finance becomes increasingly more straightforward.
But if you’re currently on an IVA or if you get an IVA in the future, you will need approval from your Insolvency Practitioner. The reason for this is that you can only take credit up to £500 without approval or consent.
Can I Get Car Finance When in an IVA?
Yes, you can. But as mentioned before, the terms of your IVA mean that you need written approval from your insolvency practitioner to take out new credit over £500.
Your insolvency practitioner will mainly look at two factors:
A ‘yes’ to both could pave the way to that car you need.
But if you’re worried that you might not get approval, then make sure to create a budget with all the costs required to own a car in order to prove that it is affordable. Keep in mind to include all the costs, including:
How to Apply for Car Finance with an IVA
In order to apply for car finance with an IVA, the firm makes sure to secure a letter. This letter should be from your IVA supervisor stating that new credit won’t affect your IVA or your financial situation. Then, make sure you meet the following criteria:
- Monthly earnings over £1,000 (after tax)
- Age between 20 and 75
- A full, valid UK driving licence
- Two consecutive months of pay slips, bank statements, or tax returns
Hand over the documents to the lender, and if there are no issues, you will receive your car finance in due time.
Does an IVA Affect Your Credit Score?
An IVA will be recorded on your credit file, which will impact your credit score. This may mean it’s difficult to get credit, such as loans, a mortgage, or car finance.
This will show on your credit file for six years from the date the IVA was approved. But there are ways in which you can improve your credit score.
If you’re under an IVA, the key to improving your credit score lies in maintaining your current payments. This includes:
- On-time Payments: Paying bills on time will reflect positively.
- Check Credit Reports: Regularly review your credit reports for errors.
- Secured Credit Card: Consider applying for a secured credit card with approval from your IVA supervisor.
Remember, a slight increase in your credit score can make a significant difference when applying for any loan.
Where Can I Get Car Finance While in an IVA?
If you’re on an IVA, car finance is not easy. But you have a high chance of getting car finance if you directly approach companies that specialise in providing car finance for people who have:
- Poor credit scores
- County Court Judgements (CCJ)
Also, note that this type of lender offers car finance with high interest due to the risk. This is why you should take car finance only if you have no other choice. But since having a new car is crucial for some people to keep their jobs, a low-credit lender might be the only option.
Can I Get Guaranteed Car Finance with an IVA?
Be cautious if a company promises guaranteed car finance. They’re likely sketchy. Responsible lending means diving deep into your finances. No proper lender will guarantee car finance. This is because the following varies from person to person:
- Credit scores
So, a lender will always look at these factors before they offer money to see if you can actually afford it or if they are taking a risk. So it is not guaranteed whether you will receive car finance or not. Thus, if a company guarantees car finance, then something is not right.
How to Increase Your Chances for Approval for IVA Car Finance?
In order to increase your chances of approval, make sure to improve your credit score. You can do this by making payments on time and avoiding any delays. But some other methods you can try include:
- Provide Collateral: If possible, collateral can improve your eligibility.
- Co-signer: Having a co-signer with a good credit score can help.
Can I Keep My Car on Finance on an IVA?
If you’re on an IVA, you can keep your car on finance. But it depends on your circumstances and some other factors, which we will discuss below.
- Monthly Payments: The cost should not exceed your monthly budget.
- IVA Supervisor Approval: Your IVA supervisor should give a nod to your car finance.
If your existing car finance does not interfere with your IVA payments, you’re good to go. Your supervisor will likely support you.
Follow these steps to make sure you can keep your car:
- Speak with your IVA supervisor about your situation.
- Update any changes in your financial situation immediately.
- Maintain your IVA payments and car finance simultaneously.
What Kind of Car Can I Get on Finance While in an IVA?
The best option is to take a second hand car that has a:
- Manageable level of fuel consumption
- Low tax
- Low insurance costs
This will help to keep your car within the budget and also stop you from further drowning financially when it comes to making payments every month, along with the costs of running the car.
Also, keep in mind, before you make the decision, obtain a quote or two. Do this before you approach your IVA supervisor so that you can see how much the monthly repayments will be.
Need More Help?
If you find having an IVA and car finance a hassle and want a debt solution that won’t interfere with your ability to get car finance, there are alternative debt solutions available in the UK. But we recommend that you make the choice wisely, as choosing the wrong debt solution can be costly and even burden you further.
The best option is to get professional advice on the matter. Feel free to fill out our online form, and our Money Advisor Team will provide personal help.
Alternatively, if you want free debt advice, there are many debt charities in the UK that will guide you through the process. A few debt charities that you can reach out to include:
- National Debtline
- Citizens Advice
- An IVA is designed to help people manage overwhelming debt.
- In order to apply for an IVA, you need to consult an Insolvency Practitioner (IP).
- Getting car finance with an IVA is not impossible, but it is tough.
- The reason why it’s difficult to get car finance with an IVA is because of the impact that an IVA has on your credit score.
- If a lender is willing to offer car finance, you first need approval from your IP.
- After receiving approval and a letter proving it, you can show it to your lender to receive the car finance.
- A letter from an IP is required in order to prove that getting car finance will not interfere with your IVA.
- We recommend that you get a second-hand car with manageable costs instead of a brand new one, which can be much more expensive.
- If you want an alternative to an IVA that won’t affect your ability to get car finance, there are multiple debt solutions in the UK that you can choose from.
- If you want further advice on IVA car finance, you can speak to a debt charity for free advice or consult a professional debt advisor such as our Money Advisor Team.