Car Finance with an IVA

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.

Looking for car finance?

Get a quote in minutes with no impact on your credit score

Frequently Asked Questions

While you won’t need a good credit score to flat out buy a car, it can affect things if you want to get car finance. Overall the better your credit rating the better deal you’ll get on your car finance.

A poorer credit score may mean you are either denied car finance altogether by some lenders or else face higher interest rates or monthly repayments. That shouldn’t put you off though, at ChooseMyCar we are experts in bad credit car finance and can even help people with CCJs or IVAs get car finance. For more information on raising your credit score, check out our guide.

The amount you can afford to spend on a car will vary depending on your situation. The important thing is to make sure you can afford any repayments that your car finance agreement sets out. Missing repayments can cause issues between you and your lender and could end up in court or affecting your credit rating. 

To work out what you can afford, try our car finance calculator.

Your car finance may have been refused for a number of reasons. These are generally one of the following: 

  • Poor credit history or a bad credit score - read our tips on improving your credit score
  • You don’t meet the criteria for qualifying for that lender’s finance
  • Your employment status - some lenders won't approve you if you are unemployed or self employed
  • Type of driving license
  • Age - this could be because you're too old or a young driver. 

For more information on why you may have been declined, please read our guide on being refused car finance.

Guarantors will have to undergo a credit check at the same time as the borrower. This is done to make sure that they are in the right situation to be making any repayments if they are called upon, and the lender will want to see that they are reliable.

The length of a car finance agreement will vary for a number of reasons. The overall length of a term is usually measured in 12 month increments. 

These terms usually start with a minimum of 24 months (2 years) upt to a maximum of 96 months (8 years). Generally terms for used cars are shorter than those for long cars. 

While the monthly repayments will likely be lower on a longer term plan, it’s worth working out how much interest you’ll pay if you opt for something over a longer period of time.

It is possible to get car finance with bad credit. Many lenders provide loans and finance options specifically for people with bad credit.

Personal loans can be a great car finance option if you have bad credit. And a guarantor loan may help you avoid higher interest rates; this is where a friend or family member co-signs the loan, agreeing to meet payments if you're unable to.

With pre-approval on a personal loan, you can walk into the dealership like a cash buyer. You can be in a better position to negotiate on price. And you can avoid the stress of the finance office.

Your credit file is checked if you apply for car finance. And you'll usually have to provide proof of ID, address, and income. The specific documents you'll need ultimately depend on the finance provider you go with.

Providers will check your credit score when you apply - initially via a soft search. They'll perform a hard credit check if you choose to enter into a contract with them. Most lenders will need to see your driving licence - full or provisional. You may also be asked to provide:

  • Your passport - for proof of ID
  • Utility bills or council tax letters - for proof of address. These usually need to be dated within the last three months.
  • Payslips - for proof of income and to make sure you can afford the payments. Some providers may ask to see a few months' worth.

While it’s not ideal, there are circumstances that may occur that stop you from making a payment.

If you are unsure about your ability to make an upcoming payment we would recommend contacting your lender. This way there may be something that can be worked out before the payment is missed.

If you’ve already missed your payment, and can afford to make it, contact your lender as soon as possible to make the payment. You may incur a late fee, but making the payment can stop anything else from having.

If you continue to miss payments there is a chance your car could be repossessed and you will still owe for missed payments. Your credit rating will also be negatively affected.

A guarantor loan is different from other loans in a couple of ways. First of all, they include a third party. That third party will be someone you know who will act as a guarantor and will make any of the payments you miss. Secondly, guarantor loans are generally unsecured, meaning they aren’t placed against an item, like the car in a car finance agreement, so the car is unlikely to be reclaimed if a payment is missed as the guarantor will step in and make it.

Yes, you can get car finance using a guarantor. Having a guarantor may make a lender more likely to accept someone with bad credit or no credit history as a borrower. This means they can be a good option for people in these situations. 

While a guarantor can help someone who has bad credit get approved for car finance, they themselves cannot have a poor credit score.

While it’s not uncommon, and often preferred by lenders, for a guarantor to be a homeowner, it’s not essential. They could be a renter or even live with their parents. The important thing is that they can prove that they can afford to make any missed repayments.

A guarantor is someone that will meet payments if you miss one. They are usually a parent, but can be anyone not directly linked to you financially, i.e. you can’t have a joint account with this person.

Read our guarantor loan guide.

Having a guarantor can help you to get a loan when you otherwise may not have been able to, i.e. when you are a young driver, self employed or have bad credit.

Lenders may look more kindly on someone in one of these situations if they have a guarantor so they know that there’s less chance of a missed payment.

Read our guarantor loan guide.

County Court Judgements may affect your chances of being approved for car finance, however it won’t definitely stop this. As experts in car finance we may be able to help those on CCJs that want to apply for car finance.

For more information read our full guide on CCJs and car finance.