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. 

Let's delve into some common queries regarding car finance with an IVA to provide clarity and peace of mind.

Can you get car finance with an IVA?

Yes, you can still get car finance while under an IVA. However, it might be more challenging compared to someone with a clean credit history. Lenders may perceive individuals in IVAs as higher risk, which could affect the terms and conditions of your finance agreement.

When applying for car finance with an IVA, lenders will typically consider several factors:

• Credit Score: Your credit score may have been negatively impacted by the IVA, making it more difficult to secure financing. However, some lenders specialise in providing finance to individuals with adverse credit histories.

• Income and Affordability: Lenders will assess your income and expenses to determine whether you can afford the monthly repayments on the car finance. Having a stable income can improve your chances of approval.

• Deposit: Offering a larger deposit upfront can increase your chances of getting approved for car finance with an IVA. A higher deposit reduces the lender's risk and may make them more willing to extend credit to you.

• Interest Rates: If approved, you may face higher interest rates compared to someone with a better credit rating. This is because lenders may view you as a higher-risk borrower.

• Specialist Lenders: Some lenders specialise in providing finance to individuals with poor credit histories or IVAs. These lenders may have more flexible eligibility criteria, but you should expect higher interest rates.

Does an IVA affect car finance?

Yes, an Individual Voluntary Arrangement (IVA) can affect your ability to get car finance. 

Lenders view an IVA as a form of insolvency, indicating financial instability. They may therefore see you as a higher-risk borrower when considering your application for car finance. This increased risk can lead to several potential implications:

• 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.

It's important to be transparent about your IVA status when applying for car finance. Attempting to conceal it could lead to legal repercussions and further financial complications. 

Instead, seek out lenders who offer IVA car finance options. By understanding the impact of an IVA on car finance and exploring your options, you can make informed decisions to manage your debt responsibly.

Is my car safe in an IVA?

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 Insolvency Practitioner (IP) to ensure compliance with the terms of your agreement.

Here are two key points to consider regarding the safety of your car in an IVA:

• Essential vs. Non-Essential: If your car is essential for your daily life, such as commuting to work or transporting dependents, it's more likely to be protected 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 there's significant equity in your car, meaning its value exceeds any outstanding finance or loans secured against it, your IP may propose releasing this equity to repay creditors. However, this doesn't necessarily mean your car will be seized; instead, you may be required to release a portion of the equity to fulfil your obligations under the IVA.

Ultimately, the decision regarding the safety of your car in an IVA lies with your IP. They will assess your circumstances, including your income, expenses, and the value of your assets, to determine the appropriate course of action.

Is an IVA bad for your credit score?

Yes, having an IVA can negatively affect your credit score. It stays 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 demonstrating responsible financial behaviour, such as making timely payments and managing your debts well, you can gradually improve your credit score over time. 

I'm currently in an IVA but need car finance

While being in an IVA can complicate your financial options, it doesn't necessarily mean you're entirely excluded from accessing car finance. 

Your first port of call should be finding a lender who specialises in providing finance to individuals in IVAs and understands the unique circumstances of borrowers in debt management plans.

If traditional car finance proves challenging to obtain, you can also consider alternative options such as leasing, where the requirements might be less strict. Exploring the possibility of used car finance or a more affordable vehicle could also widen your options.

I'm currently in my 4th year of an IVA. Can you get me car finance with bad credit?

If you’re currently still in an IVA, we may be able to help you find car finance. 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. 

Once your IVA ends, it’ll be easier to find you a car finance deal. At Car Finance 247, 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.

Can I lease a car if I am in an IVA?

Leasing a car while in an IVA is usually more challenging than purchasing one outright. Leasing companies typically conduct credit checks, and your IVA may negatively impact their decision. However, it's not entirely impossible, especially with the assistance of specialist lenders.

Before pursuing a lease, consult with your IP to understand how it might impact your IVA. They can offer insights into whether taking on additional financial commitments is advisable at this stage and help you assess the potential risks involved.

What does an IVA stop you doing?

Entering into an Individual Voluntary Arrangement (IVA) is a significant financial commitment that comes with certain restrictions and obligations. Here are some of the things that an IVA typically prohibits or restricts you from doing:

• Taking on Additional Credit: One of the primary restrictions of an IVA is that it typically prevents you from taking on additional credit without approval from your Insolvency Practitioner (IP). This includes applying for new credit cards, loans, or overdrafts without prior consent.

• Selling Assets: Depending on the terms of your IVA, you may be prohibited from selling assets such as property, vehicles, or valuable possessions without permission from your IP. This is to ensure that any potential proceeds from asset sales are distributed fairly among your creditors.

• Making Large Purchases: While in an IVA, you're generally advised to avoid making significant purchases or financial commitments without consulting your IP. This includes buying expensive items or entering into long-term contracts that could impact your ability to meet your IVA obligations.

• Changing Your Address or Employment: You may need to inform your IP if you plan to change your address or employment during the term of the IVA. Changes in your circumstances could affect your ability to meet your repayment obligations, so it's essential to keep your IP informed.

• Incurring Gambling Debts: If you have a history of gambling or gambling-related debts, your IVA may include specific provisions prohibiting you from engaging in gambling activities or incurring further gambling-related debts during the term of the arrangement.

• Leaving the Country: In some cases, an IVA may restrict your ability to leave the country for an extended period without prior approval from your IP. This is to ensure that you remain available to fulfil your obligations under the IVA and to prevent any potential evasion of creditors.

It's essential to carefully review the terms of your IVA agreement and to comply fully with any restrictions or obligations. If you're unsure about what you're allowed to do under your IVA, it's always best to consult with your IP for guidance and clarification.

What is the bad side of an IVA?

While an IVA provides a structured way to repay your debts, there are downsides:

• Impact on Credit Score: One of the significant drawbacks of an IVA is its negative impact on your credit score. The arrangement is recorded on your credit file for six years from its start date, making it harder to access credit during this period. Even after the IVA is completed, it may take time to rebuild your credit to pre-IVA levels.

• Restrictions on Financial Activities: During the term of the IVA, you're typically restricted from taking on additional credit without approval from your Insolvency Practitioner (IP). This limitation can affect your ability to make certain financial decisions, such as applying for loans or credit cards, without prior consent.

• Potential Asset Seizure: Depending on your circumstances and the terms of your IVA, you may be required to release equity in certain assets to repay your creditors. This could include selling or remortgaging your property or surrendering other valuable possessions.

• Public Record: IVAs are registered on the Individual Insolvency Register, making them a matter of public record. This means that your financial affairs, including your IVA status, can be accessed by creditors, potential lenders, and members of the public.

• Long-Term Financial Impact: Even after completing the IVA, its effects may linger, impacting your ability to access credit or financial opportunities in the future. It's essential to carefully consider the long-term implications of entering into an IVA and to seek professional advice before making a decision.