IVA Car Finance – How it Works

Nobody wants to lose their car – or be prevented from buying one. If you’re also struggling with debts and looking for a solution which won’t affect your vehicle, then an IVA (Individual Voluntary Arrangement) might be one such option.

Below, we’ve explained just about everything you 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:

Can I keep my car on finance with an IVA?

You should be able to keep your car with an IVA – especially if it’s required for work or family commitments. However, as the debt is ‘secured’, you won’t be able to include this in the agreement.

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 payments will no longer become secured and, therefore, could be included in the IVA.

During the approval stage of the IVA, your car finance agreement will be assessed by your insolvency practitioner. They will probably give permission for the arrangement to continue but the final say will depend upon your circumstances.

Can I get a car on finance with an IVA?

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 permission from your insolvency practitioner 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 does not hinder this.

Even so, finding a lender which will provide you with a vehicle could be challenging as, at least in the short term, an IVA will have an adverse effect on your credit rating.

How does an IVA affect my 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, seeing as you’ve had difficulties with creditors before, the finance provider may be reluctant to approve your request.

What about after an IVA?

After an IVA is a different story. Although the agreement will be removed from the Insolvency Register once it is completed, an IVA will stay on your credit report for usually a year longer.

Your insolvency practitioner will no longer need to grant permission for credit. However, lenders will still be reluctant to provide finance until your score has improved. With patience, and focusing on improving your rating though, you should eventually be able to access better options.

However, there may also be specialist finance providers willing to grant credit after an IVA.

How does car insurance with an IVA work?

The price of car insurance can also be affected if you have an IVA. Initially, insurers may now put you in a higher risk category than before. Your chances of suffering a traffic accident haven’t increased, but – because the IVA demonstrates you’ve had problems repaying debts – you may be considered more likely to miss payments on your insurance.

Furthermore, because insurance providers will also look at your credit report, your reduced credit score may also mean companies will charge you higher premiums for cover.

Have any questions? Get in touch

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. To find out more information about this agreement, get in touch today.

Our specialist team are happy to answer any questions you might have. Just click on the button below to find out more: