Can You Get Car Finance with an IVA?
Are you in an Individual Voluntary Arrangement (IVA) and wondering if you can still get car finance? You're not alone. Many people in similar situations have questions about their financial options, especially when it comes to purchasing or leasing a car.
To help clear up any questions you have, we’ve answered some common queries regarding car finance with an IVA.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to help you pay back your debts in a way you can afford.
You make regular payments to an insolvency practitioner (IP) for an agreed amount of time (usually 5 to 6 years), who then distributes the money to your creditors. During the IVA, your creditors should stop adding interest or contacting you for payments. Once it ends, any remaining debt is usually written off. The rules of an IVA can include:
Making the agreed payments each month (or as a lump sum).
Letting your IVA provider know if your income increases or you gain money.
Not taking out new credit, like a loan or credit card, unless you get permission first.
An IVA can help you take control of your debts and avoid going bankrupt. However, it will seriously impact your credit score. This can make it much harder to get a loan. But let’s look at IVA car finance and what your options are.
IVAs and Car Finance
Can you get car finance with an IVA?
If you’re currently still in an IVA, we may still be able to help you find car finance. Some of our trusted lenders specialise in bad credit car finance, even if you have an IVA on your credit file. These lenders look at more than just your credit score and take a range of factors into account when assessing your application.
But first things first, you need to seek permission from your IP before you apply with us. After this, we might then need more information from your creditors when assessing your application.
Even with approval from your IP, getting car finance with an IVA can be trickier. Lenders view an IVA as a sign you’re a higher-risk borrower. Because of this, you may find car finance harder to get, and you may face less favourable options. These could include:
Higher interest rates: Lenders may offer you car finance but at higher interest rates compared to individuals with a clean credit record. This is because they're taking on more risk by lending to someone in an IVA.
Stricter terms: In addition to higher interest rates, lenders may impose stricter terms on your car finance agreement. This could include a larger deposit requirement or a shorter repayment term.
Limited options: Some lenders may be reluctant to approve car finance for individuals in IVAs. However, there are specialist lenders who cater to individuals with poor credit or those in IVAs, providing alternative options. Credit is subject to status.
It's really important to be transparent about your IVA status when applying for car finance. Attempting to conceal it could lead to legal repercussions. Instead, seek out lenders who could offer IVA car finance options.
Getting car finance after an IVA could be easier for you. Once your IVA is over, you can start to rebuild your credit score and this may put you in a more favourable position for getting car finance.
How long does an IVA impact your credit score?
An IVA can stay on your credit file for six years from the date it begins, impacting your ability to borrow money during that period.
However, it's important to note that, while an IVA does harm your credit score, it's not necessarily permanent. Once you complete the IVA and it's removed from your credit file after six years, you can begin rebuilding your credit.
By showing responsible financial behaviour, such as making timely payments and managing your debts well, you could gradually improve your credit score over time.
How long do you have to wait after an IVA to apply for car finance?
You don’t have to wait until your IVA is over to apply for car finance, but holding off could improve your chances of approval. An IVA can stay on your credit file for six years, which can make it harder to access credit or secure a good rate.
If you can wait until your IVA is complete and you’ve had time to rebuild your credit score, you may be offered more favourable terms. But, if you need a car sooner, we may still be able to help. Just keep in mind that a lower credit score could mean higher interest rates or fewer options. Credit is subject to status.
Eligibility for car finance with an IVA
Eligibility checklist
To get car finance with an IVA, you must be eligible. The basic criteria that applies for all standard car finance applications is as follows:
Be at least 18 years old.
Hold a valid UK driving licence.
Provide proof of identity and sometimes proof of address.
Have a regular source of income.
There is no definitive credit score for car finance. But, you may get more favourable loan terms if you have a good credit history, and can show responsible borrowing. However, some bad credit lenders may still consider applications with IVAs, subject to status.
Getting permission to take out a loan during an IVA
There are also specific considerations for applicants with active IVAs. To get car finance with an IVA, you must:
Get permission from your IP.
Get an affordability assessment. This helps you see if you can handle repayments with your IVA commitments.
It’s crucial to speak to your IP before making any kind of financial application.
Already have a car on finance?
In most cases, if you're making regular payments for your car and it's considered necessary for your daily activities or employment, it's unlikely to be seized as part of the IVA. However, it's crucial to consult with your IP to ensure compliance with the terms of your agreement.
If I have an IVA can I keep my car on finance?
Here are two key points to consider regarding whether you can keep your car in an IVA:
Essential vs. Non-Essential: If your car is vital for daily tasks, like getting to work or taking care of others, it’s likely to be safe in the IVA. On the other hand, if you own a luxury or non-essential vehicle, your IP may consider it as an asset that could be sold to repay creditors.
Equity in the Car: If your car is worth more than any loans on it, your IP might suggest using this equity to pay off creditors. But this doesn't mean your car will be seized. Instead, you might need to release some equity to meet your IVA obligations.
Ultimately, the decision lies with your IP. They will look at your situation including your income, expenses, and asset value. Then, they will decide the best action and if you can get IVA car finance.
Types of car finance you could be offered
If you need car finance with an IVA, you could still be eligible. At Car Finance 247, we offer two different kinds of car finance: Hire Purchase and Personal Contract Purchase.
Unfortunately we don’t currently work with lenders who offer PCP deals to customers with an active IVA. That said, you may still be eligible for HP finance, depending on your individual circumstances. Let’s look at these in more detail.
Hire Purchase (HP) vs Personal Contract Purchase (PCP)
Hire Purchase: With HP you may need to pay a deposit, and then fixed monthly payments, plus interest for the duration of your loan. Once all payments are made, you’ll own the car outright. It’s a straightforward option that might be available to people with a range of credit histories, including those with an IVA, subject to the lender’s criteria.
Personal Contract Purchase: PCP usually comes with lower monthly payments than HP. You’ll also pay a deposit and monthly payments, plus interest. But at the end of the term, you can either return the car, trade it in, or pay the lump sum ‘balloon’ payment if you want to keep it.
How the Car Finance 247 process works
Applying for car finance with an IVA doesn’t need to be complicated. At Car Finance 247, we’re one of the car finance companies that may be able to help if you have IVAs on your credit file and we’ll do our best to match you with one of our lenders. Our aim is to make it as simple and accessible as possible. Here’s how it works:
Lender matching process
Our online application only takes a few minutes, and there’s no obligation to go ahead. After you apply, we’ll search our panel of lenders to see who might be able to offer you a deal. We’re proud to work with a trusted panel of lenders, including some that could offer IVA car finance.
If you’re approved in principle, your dedicated account manager will be in touch about your deal and the next steps. If you’re in an active IVA, some lenders might ask for written permission from your IP before offering finance. Your account manager will explain what’s needed and help you through the process.
Expected timelines for your application
When you apply with us, you’ll get a response in minutes! If you’re approved in principle, the time it takes to complete your finance agreement can vary depending on your circumstances and how quickly the paperwork is completed.
To help things go as quickly as possible, it’s helpful to have all your documents ready, which may include proof of income and details of your IVA.
Why choose CF247?
At Car Finance 247, we’ve helped many people with different credit histories get car finance, including those with active IVAs. We understand that life doesn’t always go to plan and that having bad credit doesn’t mean you should be stuck without a car.
Our team has years of experience supporting customers who’ve faced financial difficulties. We work with a panel of trusted lenders, some of whom specialise in helping people with poor credit or in need of car finance with an IVA. Whatever your financial circumstances, we could help. Our lenders also specialise in offering help to those looking for car finance on a DMP, car finance with a default and car finance with a CCJ.
We can’t promise approval, but we understand how vital a car is for daily life. We’ll do our best to help you get on the road. Credit is subject to status.