Can I get car finance if I am in an IVA?
One of the first questions we often get asked about car finance here at ChooseMyCar is the extent to which your credit score, credit history and current finance agreements can have an impact on your ability to secure a car finance loan. We understand that this can cause concern and uncertainty, especially if you are currently in an IVA (individual voluntary arrangement).
If you are in an IVA, it can feel like a huge obstacle when it comes to securing credit agreements of all kinds, including car finance. In fact, many people simply assume that they won't be able to secure car finance loans and get find car finance agreements if they are on an Individual Voluntary Arrangement. But this isn't always the case, and it's important to explore all your options with a trusted finance provider.
It's certainly true that being on an IVA can make it a little more difficult than usual to get new credit deals like car finance, and this is usually due to the problems and limitations when accessing credit on an IVA. But it's important to know that it isn't impossible. In fact, here at ChooseMyCar, we are experts in helping customers with bad credit scores find appropriate car finance agreements that work for them.
Being on an IVA does show that you are an individual who is capable of paying off your debts, meeting scheduled repayments, and it demonstrates a level of financial responsibility. But there are still certain obstacles to overcome.
Let's face it: being on an Individual Voluntary Agreement is going to stop you from needing to drive. Fortunately, you have come to the perfect place to apply for affordable car finance here at ChooseMyCar. We are experts in car finance for used cars with plenty of experience in the industry. If you need car finance and you have bad credit or are on a CCJ or IVA, no one is better positioned than the ChooseMyCar team to help you find a finance deal that works for you.
What do I need to do to apply for car finance when I'm in an IVA?
As we mentioned above, having an IVA does not mean that you
cannot apply for car finance. It might make it more difficult in some cases,
but it certainly doesn't mean that if you are in an Individual Voluntary
Arrangement that you should consider it impossible to find good car finance.
The good news is that you've come to the right place here at ChooseMyCar.
Our experts will help you to find a finance deal that matches your repayment plan and exactly what you can afford. One of the main things that we will need from you is a letter from your IVA supervisor that confirms that the car finance agreement we have in place with you will not put you in any further financial risk.
Getting permission for car finance programmes from your Insolvency Practitioner (IP)
When you are in an IVA
(Independent Voluntary Agreement), you will need the approval and permission of your Insolvency
Practitioner (IP) when entering new credit agreements over a certain amount. This means that if you are entering a new credit agreement for
anything over the value of £500 and that isn't for essential utilities such as
gas and electricity, you'll first need to provide a letter of confirmation from
your IP. This includes car finance agreements for used cars here at
Why is this such an important step?
Well, everyone who enters an IVA is assigned an Insolvency Practitioner right at the start of the entire process. Essentially, it is your IP's responsibility to ensure that you do not enter any financial agreements that might jeopardise your ability to pay off the debts on the IVA. If you are on an IVA and you are steadily paying off a certain amount in monthly payments, then taking on the extra financial responsibility of further finance arrangements has to be done with your ability to continue paying these original debts off in mind.
Your Insolvency Practitioner is responsible for helping you to avoid further agreements that will stop you from getting into further debt. This protects your financial security and financial future whilst also ensuring that your current and past debts continue to be paid in full.
So how do I prove to my Insolvency Practitioner that I should take on a new car finance agreement?
There are essentially two steps to securing permission and a confirmation letter to enter a car finance deal from your IP. These include:
- Proving to your IP that you can afford the car finance deal - This is the first and most important step, because it revolves around your ability to enter a car finance agreement and to take on that financial responsibility while still upholding your IVA payments and current debts. Your best bet is to thoroughly understand your own finances and come to a conclusion about what you can and cannot afford. Then, make sure that there are responsible lenders who have are offering car finance deals that you can afford. Fortunately, here at ChooseMyCar we have an excellent online car finance calculator that will help to provide you with some clarity.
- Proving to your IP that the car finance deal is an important agreement - What does this mean exactly? Well, you will likely need to prove to your Insolvency Practitioner that not only can you afford your new car finance deal, but that it is also an important agreement for you to enter. For instance, you might do this by proving that you need the car to get to work, or that the costs of buying and running a used car on a finance arrangement will actually cost less than the use of public transport. If you can prove that you need to drive either to save money or as a work necessity, then your IP might approve monthly car payments as part of a finance arrangement.
In all, it's important to remember that if you are on an IVA, then that financial responsibility will likely be taking up a significant proportion of your disposable income. Showing to your Insolvency Practitioner that you can still afford a car finance deal and that it won't put you at further risk of insolvency is a vital step to undertake before applying for car finance. The good news is that your IP understands the importance of getting to work, and if you can prove that you need the car to continue earning, or that you will actually be saving money compared to using public transport, then you have a good chance of securing a confirmation letter.
In conclusion: if taking a car finance loan from a suitable lender is sustainable when balanced against your current living costs and IVA budget, then your Insolvency Practitioner will likely approve it.
I've managed to get a letter of approval from my IP - can I now enter a car finance deal?
If you have undergone the previous steps and have managed to gain approval from your IP to enter a car finance arrangement, then that's fantastic - you won't be able to secure a deal with a car finance company without one. However, it's worth bearing in mind that some car finance lenders simply will not approve a car finance deal for anyone with an IVA.
Credit checks are absolutely standard when entering into credit agreements such as a car finance loan. If you are on an IVA, then this will appear as part of your credit report and your credit history, and will always be taken into account as part of your application. Every car finance company will perform a credit check when you apply for car finance with them. However, some car finance lenders will immediately refuse to approve a deal, while others will not.
Being in an IVA may indicate to some finance companies and prospective lenders when they check your credit history that you may not be a reliable applicant when it comes to making repayments and staying on top of your finance. However, there are some companies out there that will certainly offer car finance to you while you are in your IVA. In fact, some lenders even specialise in providing car finance to people with bad credit, a CCJ and an IVA.
Here at ChooseMyCar, for example, we have years of experience working with customers with bad credit or an IVA in order to better provide them with affordable and manageable car finance that works for them. While some car finance lenders will flat out refuse an application for finance from someone with an IVA, we will not and our experts are always on hand to talk to you about any problems or concerns you may have.
One thing that is absolutely crucial to remember when looking for a suitable car finance company is that you will always need to have the full permission and approval of your IP to go ahead with finding a suitable deal that meets your finance needs. Then, when you receive an offer, it's important to have this checked by your IP to make sure that you can afford it alongside your living costs and IVA budget without facing unaffordable debt.
What exactly is an IVA (Individual Voluntary Agreement)?
An Individual Voluntary Agreement (IVA) is a legally binding
agreement between yourself and your creditors that ensures that you are able to
pay back your debts over a specific period of time. An IVA might be paid off in a one off payment, frequently known
as a lump sum IVA, or it could be set over a longer period such as a number of
years, to be paid off in monthly payments.
Depending on how you and your Insolvency Practitioner choose to handle your
debts, some of your disposable income might be dedicated to making regular
payments towards your outstanding debts.
An IVA is a kind of official debt solution for anyone who is considered insolvent. It is a form of formal insolvency for someone who is legally considered to be incapable of making the debt repayments that their creditors are demanding. It involves a formal agreement between you and your Insolvency Practitioner to make correct payments towards clearing your debt - it can lead to a poor credit history over time.
Who is applicable for an IVA?
An IVA is most often available for someone who owes £6,000 or
more in unsecured debt - in other words, debt that is not backed by collateral.
The benefit of an IVA is that you are assigned an IP (Insolvency Practitioner) who will
negotiate with the companies you owe a debt to on your behalf. Rather than any current repayments you are making to
individual creditors, when you enter into an IVA, you will begin to make
payments directly to your IP instead. Then, your IP will manage the repayment
of your debts to individual creditors, which might take place over a five to
six year period.
Being in an IVA will appear on your credit file and credit record and will affect your credit score - something that will be seen and taken into account whenever you choose to apply for new credit finance or other new finance agreements. However, when your IVA term is up, all your remaining debt will be written off and you will be free to begin rebuilding your credit rating.
Will I actually know if I have an IVA?
In short, yes. Unlike other debt related issues such as arrears
and county court judgements, you will always know whether you have an IVA or if
you do not. The process takes a while to set up an IVA and requires you to
voluntarily opt in to the agreement. You will also need to work alongside and
speak to the Insolvency Practitioner's firm that is working on your behalf.
A large part of setting up an IVA are the limitations and restrictions surrounding your monthly payments. When you begin the process, your IP will make very clear that there are very strict rules surrounding what you can and cannot do when it comes to seeking finance agreements that will affect your monthly outgoings. This is one of the reasons that securing a car finance loan while you have an IVA can be difficult.
I had an IVA but it has ended - can I now apply for car finance?
If you have had an IVA that has now come to end, then congratulations - you will now hopefully be free of debt. However, this unfortunately doesn't mean that you will now be able to enter new finance agreements and credit deals without a problem. Anyone who has an IVA will remain on the insolvency register for around three months after the IVA term has been completed. On top of this, it will remain on your credit report and credit file for six years after it has ended, and potential creditors and prospective lenders in this time will see the IVA when they perform a credit check in this time - it will continue to affect your credit score for this time.
In general, the same rules will apply as for applying during an IVA term - some lenders will outright deny any application while others will be more receptive. In any case, it is a great idea to begin taking steps to improve your credit score during the period after your IVA has ended. Fortunately, you have come to the perfect place here at ChooseMyCar, as we have a range of resources for you to delve into.
This includes a comprehensive and insightful guide on how to improve and raise your credit score. There are many things that you can do to help raise your credit score, and if your credit report shows that you have been financially responsible and have taken steps to improve your credit file, then potential creditors and finance providers will take this into account and it will mitigate the effect your past IVA has on your poor credit history.
What car finance options are available to me during my IVA?
Getting car finance when you have an IVA isn't always straightforward and it can be a confusing process at times. We understand that here at ChooseMyCar, and we know how frustrating it can be when choosing from the different car finance options available, and understanding which of these options are available to you. It's important to understand the various types of car finance, which includes:
- HP (Hire Purchase) - This is the option that allows you to pay in instalments and own the car outright when you make the final payment at the end of the car finance term.
- PCP (Personal Contract Purchase) - This is a type of hire purchase that means that at the end of the car finance term, you are required to either pay a balloon payment in order to own the car, or to hand it back.
- PCH (Personal Contract Hire) - This is essentially a lease contract in which you are only renting the car with no purchase involved. At the end of the term, the car is not bought or owned but is returned instead.
- PL (Personal Loan) - A personal loan is an alternative to other car finance options that allows you to borrow money from a bank, building society or a different lender. This loan means that you own the car outright from the beginning, allowing you to approach the process much like a cash buyer.
When looking for car finance during an IVA, it's important to look at all the options in front of you. It can be a daunting task, as the different types of car finance all bring with them benefits and drawbacks to someone in an IVA. Fortunately, the expert team here at ChooseMyCar is always on hand to provide the guidance and assistance you need to make an informed decision based on finding an effective option for your current budget
Getting Hire Purchase car finance when you have an IVA
Hire purchase is certainly one of the most popular ways of buying a car, whether it be for someone with an IVA or not. With a hire purchase (HP) deal, you will most often pay in monthly instalments in order to repay the entire price of the car plus some interest. This will be over a set period of time at the end of which you will own the car outright. It is generally a very common and cost effective way of buying a car.
Hire purchase car finance agreements are generally quite flexible, as the deposit and the fixed term can be adapted to suit your particular living costs and budget alongside your IVA. However, it's worth noting that monthly HP payments are generally higher than similar options, which can make hire purchase difficult for someone with an IVA, who might want to explore cheaper options on a monthly basis.
Should I get a Personal Contract Purchase agreement if I have an IVA?
A personal contract purchase (PCP) agreement works a little differently
to a hire purchase agreement. You will usually have to make an initial deposit,
but the monthly payments in personal contract purchase are often at
a lower cost than those made under a hire purchase deal. However, at the end of your car finance term, you will need to
make a final payment, known as a balloon payment, in order to keep the car and
own it outright.
This is often a very appealing option for people who currently have an IVA, as the lower monthly costs can be balanced better against the monthly costs of the IVA. However, if the balloon payment cannot be paid at the end of the term, you will need to either hand the car back or part exchange it for a new car.
I need to keep costs down because of my IVA - is a Personal Contract Hire right for me?
A personal contract hire (PCH) car finance agreement is
essentially a lease contract deal. In this arrangement, you never own the car
but simply pay for the use of it over a fixed term. The amount you pay is based
upon the expected depreciation of the vehicle over that time, and you will be
restricted in the mileage you can use as well. This means that the monthly
costs of a personal contract hire is highly dependent on the kind of car that
But is a PCH deal good for someone with an IVA? Well, one of the main advantages of a personal contract hire is that it usually comes with significantly lower monthly costs than HP, personal loan and PCP agreements. This is appealing to customers who need a car for work but might struggle to find the budget for a purchase agreement. However, you are only paying for the use of the vehicle and will never actually own it.
Should I think about getting a Personal Loan to finance my car during my IVA?
Securing car finance through a personal loan is an alternative
to other options that sees you secure a personal loan with a bank or other lender with the
intention of buying a car outright. This means that your bank
loan is paid back directly to your lender and the loan is not secured on the
vehicle, and you are the outright owner of the car from the beginning.
If you get an IVA whilst on a personal loan car finance deal, then the loan will be considered part of your IVA debts and will be paid off as such. However, if you currently have an IVA and are now looking for car finance, you may find it difficult to go down the personal loan route. Personal loan repayments are often a bit higher and come with increased interest, meaning that persuading both your IP and your lender to approve a personal loan agreement may be challenging.
Get in touch with the experts here at ChooseMyCar
Do you still have questions about securing new credit deals and
car finance that meets your IVA budget and finance needs? Well, you've come to
the right place. Here at ChooseMyCar, we are experts who
specialise in providing car finance for people who have bad credit or who have
an IVA. Want to find out more? Just get in touch with us
today. Our friendly and professional team will help you
to find a repayment plan that suits you.