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IVA Car Finance article
IVA Car Finance article
Creditfix > Knowledge Hub > IVA Car Finance

One common question people ask when considering an IVA is how this might affect their chances of purchasing a car on finance.

If you do choose to enter into an IVA (Individual Voluntary Arrangement) accessing any kind of credit will be more challenging.

However, it is certainly not impossible to find a suitable package.

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Can I get car finance during an IVA?

Getting the permission of your Insolvency Practitioner

During an IVA, you will need permission from the Insolvency Practitioner (IP) dealing with your case to obtain credit of more than £500 – not doing this will breach the terms of your IVA and could result in it failing.

This means that you will definitely need their approval if you would like to obtain car finance with an IVA.

Getting a car finance deal that fits with your individual voluntary agreement

Your IP will decide whether or not this request is reasonable based on your circumstances – namely your income and expenses.

If committing to a car finance loan is sustainable given your current budget and living costs, your IP is likely to approve it.

However, since IVAs involve paying a significant proportion of your disposable income towards settling your debts, you may find you are not left with enough for monthly payments.

car finance agreements for people with a poor credit history

Being in an IVA will limit the car finance programmes which you are eligible for. IVAs are a type of formal insolvency – as such they are recorded on the formal Insolvency Register.

Because of this, an IVA will also appear on your credit file, indicating to lenders that you have had trouble managing credit in the past.

This will lower your credit score, and make lenders more cautious when it comes to providing you with credit.

What car finance options are available during an IVA?

Using a bad credit car finance company

There are companies out there which specialise in providing customers with poor credit scores, or histories of struggling to manage with debt, with loans.

It is important to be cautious when approaching companies like these, however, as borrowing money when you have a poor credit history can be very expensive.

hire purchase car finance vs purchasing a car outright

It is vital to weigh up whether you really need car finance. Of course, for some people, having access to a reliable vehicle is vital to their work, and purchasing one outright may be a struggle.

In this instance, you might feel that a car finance loan is your only option.

However, if you can manage without a car temporarily – for example by using public transport or organising a carpool – it is definitely worthwhile saving money to purchase a car outright.

Using a personal loan to buy a used car

It is also advisable to purchase a used car. It’s a well-known fact that a new vehicle’s value plummets the moment it is driven out of the show-room, and you can take advantage of this by purchasing a car second hand.

If you need credit to purchase a car in this way, shop around.

Car finance companies will not necessarily have the best value loans, especially for people with an IVA listed on their credit report.

You might consider approaching a credit union.

They are known for helping people who have a poor credit rating and would otherwise struggle to access a loan.

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Can I get a car finance agreement after an IVA?

Information about your IVA will be removed from the Insolvency Register as soon as it is completed.

However, it will remain on your credit file a bit longer – around a year, depending on the length of your IVA. This can drag down your credit score.

How long should I wait to access car finance after an IVA?

Even though you no longer need anyone’s permission to apply for a credit agreement after your IVA is finished, it can still be challenging to find a suitable lender.

In this instance, waiting until you have rebuilt your credit score before applying for car finance is the best option.

If you wait until your IVA has been removed from your credit report and your credit rating has had a chance to recover, you will find you’re able to get a better car finance deal with lower monthly car payments.

What if I need a new car as soon as possible?

Depending on your job, your family, or your personal circumstances, waiting for your credit rating to bounce back may not be an option if you are in desperate need of a car.

If you find yourself in this position, you’ll have the usual range of car finance options available to you:

Personal loan: Borrowing money from a bank or building society that you pay back over time.

Hire purchase agreement (HPA): Putting down a deposit on a car and making monthly payments towards it, with a view to owning the vehicle after the final payment.

Personal contract purchase (PCP): Putting down a deposit on a car and making monthly payments towards it, after which you choose whether to buy it outright, trade it in for a new car and PCP deal, or return it.

What it’s important to remember is that you’re unlikely to get the best value deal if you opt to purchase a car before your credit file has recovered.

Even if a high-street lender agrees to offer you car finance, you’ll likely need to pay higher rates than a person with better credit.

Just like during an IVA, approaching a variety of lenders can be a good idea.

Credit unions may also be a good option if you are struggling to find companies who will approve your application.

Should the impact on my credit file put me off using an IVA?

If you think that an IVA is the best solution for dealing with your debt, try not to be put off by the fact that accessing credit will become more difficult.

Writing off your unaffordable debt and getting a fresh financial start is likely to be the best option in the long run, and with a little patience, you will be able to rebuild your credit score.

Where can I get more advice on IVA Car Finance and other debt solutions?

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 0431 431 or click the button to get started

Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed’s, and various other debt solutions.

How we reviewed this article:

HISTORY

Our debt experts, and insolvency practitioners continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

April 17 2018

Written by
Maxine McCreadie

Edited by
Maxine McCreadie