If you’re struggling with debts and looking for a debt solution, then an IVA (Individual Voluntary Arrangement) might be a good option for you. We know that nobody wants to lose their car – or be prevented from buying one, so we’ve gone into detail about how an IVA may affect car finance.
Below, we’ve explained a lot of the things you may need to know about IVA car finance. As a result, you should be able to make an informed decision as to whether an IVA is right for you:
You should be able to keep your car with an IVA, especially if it’s required for work or family commitments. However, it’s worth noting that this may depend on the cost of the car finance and the value of the vehicle. You may be asked to downsize if the cost isn’t a reasonable amount.
As the debt is ‘secured’, you won’t be able to include this in the IVA . Instead, you will typically have the choice of continuing to make payments on the vehicle or return the car to the finance company. In the case of the latter, once the asset is returned, the outstanding finance will no longer be secured and, therefore, could be included in the IVA.
During the initial stage of the IVA, your car finance agreement will be assessed by your insolvency practitioner. Usually, an IVA can be proposed with car finance payments continuing, provided these are reasonable. The final say will be down to your creditors.
Our advisors will always consult with you based on your circumstances and affordability. Get in touch today to talk about whether an IVA could work for you.
If you’re currently on an IVA, then getting a car on finance could be a challenge. If you want to obtain credit worth more than £500, you’ll need prior written permission from your insolvency practitioner, and in some cases, your creditors, first. Therefore, they’ll need to grant approval before the car finance is authorised.
If the car could be viewed as an essential purchase, for example, helping you get to work, then your insolvency practitioner may be more inclined to approve the request. However, as an IVA requires you to make monthly payments, you must make sure the car finance doesn't prevent you from doing this.
Finding a lender which will provide you with a vehicle could also be challenging.
At least in the short term, an IVA will have an adverse effect on your credit rating. As an IVA is a form of insolvency, it will be recorded on a public database called the Insolvency Register and, consequently, will show up in your credit report. This indicates that you’ve had problems repaying your debts but have sought help to resolve the situation.
When lenders check your credit report, they will spot the IVA. Therefore, as you’ve had difficulties with creditors before, the finance provider may be reluctant to approve your request. However, it's important to remember that even without an IVA, the debts you have are likely to show up on your credit file. An IVA is one of the solutions that can help you clear these unsecured debts and get your finances back on track in the future.
After an IVA is a different story. Although the IVA will be removed from the Insolvency Register shortly after it is completed, an IVA will stay on your credit report for usually a year longer, as this usually remains on there for 6 years from the date of approval.
Your insolvency practitioner will no longer need to grant permission for credit once the IVA has completed. However, lenders may still be reluctant to provide finance until your credit score has improved. However, with patience, and focusing on improving your rating, you should eventually be able to access better options, so an IVA may still be the best option for you depending on your circumstances. There may also be specialist finance providers willing to grant credit after an IVA.
The price of car insurance can also be affected if you have an IVA. You could find that interest rates charged for paying the premium by monthly instalments may be higher due to you being in an IVA. As some insurance providers will look at your credit report, your reduced credit score may also mean companies will charge you higher premiums for cover. This doesn't necessarily mean that you may not experience high premiums already. You may be finding that the existing debts on your credit file are causing you some problems. You should weigh up whether an IVA is the best option to help you with these debts. Fill in our application form below to get in touch with us and our advisors will assess your circumstances. We always advise you based on what you can afford and whether an IVA is likely to work for you.
Obtaining car finance while on an IVA might seem difficult but, ultimately, this debt solution should leave you in a better position for the future. Apply now, you might be able to write off up to 83.8%* of your unsecured debts. *Based on our customers who had an IVA approved in January 2021, 10% are expected to write off up to 83.8% of their unsecured debt.