An IVA can feel like a barrier to obtaining car finance or other credit agreements. However, having an IVA doesn’t have to stop you from getting approved for car finance deals. We run through exactly what an IVA is and how it can affect your application for Car Finance below.
What is an IVA?
An Individual Voluntary Agreement (IVA) is a formal agreement between yourself and creditors to allow you to pay off any debt that you owe. This is done in a way that you can afford and could be a one off sum or spread over a period of time.
Can I get Car Finance with an IVA?
While being on an IVA shows that you are able to pay off your debts and can meet scheduled repayments it can still be hard to get new credit deals, like car finance. We understand that this doesn’t stop you from needing to drive and you can still apply for car finance with ChooseMyCar.
We will need to see a letter from your IVA supervisor however to confirm that any new agreements won’t put you at further risk.
As experts in car finance for used cars we are here to help you with getting behind the wheel of a car, even if you have bad credit, an IVA or a CCJ. Our expert team will help match your repayment plan to what you can afford.
Car finance during an IVA
During an IVA, entering a new credit agreement over the value of £500 that isn’t for an essential utility like gas or electricity requires you to have the approval of your Insolvency Practitioner (IP).
You will have been assigned an IP at the beginning of your IVA, and it’s your IP’s responsibility to make sure you don’t enter any further agreements that could stop you from being able to afford to pay off the debts that got you placed on an IVA in the first place.
It’s likely that you will have to prove to your IP that not only can you afford to pay for the car finance deal in addition to your current repayments, but that it’s an important agreement for you to enter. An example of this is if you would need the car to be able to get to work at all, or if you can prove that buying and running a car will cost less than commuting by public transport. As an IVA takes up so much of a person’s expendable income it may be tricky to prove that you can afford to do this.
Some lenders will not be willing to approve a car finance deal for people on an IVA, but there are some who are open to doing so. An IVA will show up on your credit report and therefore be taken into account when any credit checks are taken. This will indicate to many prospective lenders that you may not be reliable at making repayments.
There are a number of companies that specialise in lending and offering car finance to people during these periods, but you must always have the permission of your IP and should always double-check any offer made to make sure you can afford it.
Car finance after an IVA
Once you have come to the end of an IVA, you will hopefully be free of debt, but that doesn’t mean you will easily be able to enter new credit deals. An IVA will remain on the insolvency register for 3 months after your IVA has been completed. It will also remain in your credit report for a full 6 years, which can be offputting to prospective lenders. As such it can affect your credit score.
It’s worth taking steps to improve your credit score during this period. For tips on how to do this please view our guide on raising your credit score. If your credit report shows you have been responsible since your IVA was completed and that you’ve been working to improve your credit score, then lenders are more likely to be less concerned about the historic IVA.
ChooseMyCar specialise in car finance for people who have either bad credit or were previously placed on an IVA. Always check the details of any car finance deals you are being offered and make sure that you can afford them, as sometimes rates may be higher.