While being in an IVA can limit your options, it doesn’t mean that you can’t get approved for vehicle finance! There are a number of IVA car loan specialists who may be able to help, and many lenders will consider your application even if you have a poor credit history.
What is an Individual Voluntary Agreement (IVA)?
An IVA is a legally binding agreement between you and your outstanding creditors, which allows you to pay back your debts over a period of time. Before an IVA is finalised, it has to be approved by the court, and set up by a qualified Insolvency Practitioner. With your Insolvency Practitioner, you would work out a payment plan for the duration of the IVA, which will be based on what you can reasonably afford. If you’re making monthly payments, the IVA would last an average of five to six years.
All repayments are paid directly to the Insolvency Practitioner, who will take a fee from the funds, and then distribute the rest amongst your creditors. And once the IVA has been completed, any outstanding debt is then written off.
In order to qualify for an IVA, your debts would need to add up to around £10,000 or above, have at least two creditors, and be able to make contributions each month. It is also important to note that IVAs do come with risks. They can be costly, you may need to sell your expensive assets, and you might even have to remortgage your home. An IVA can additionally be damaging to your credit rating.
Can I Get a Car Loan With an IVA?
You are able to apply for vehicle finance if you’re in an IVA, or recently completed one, but the process is often more complicated! And your chances of approval are generally smaller, as an IVA can damage your credit rating. However, there should still be options available to you. We’ve provided some key information about taking out vehicle loans with an IVA below.
I Have an Open IVA
If you have an open IVA and are looking into car loans, you’d need to prove to your Insolvency Practitioner that you should be eligible for a vehicle finance agreement. You would do this in two steps - firstly, you’d have to prove that you’re able to afford the repayments. You’ll therefore need to go through your finances thoroughly, and complete a monthly budget. It’s also sensible to use a car finance calculator to get an idea of how much you can borrow, and what the repayments could be.
The second step involves proving to your Insolvency Practitioner that a vehicle finance deal is an important agreement for you, such as needing a car to get to work. If you’re able to show that a car is a necessity, and a car loan is the best way to finance a vehicle, you may be able to apply.
I Have an IVA on My Credit File
If you’ve previously had an IVA, but it’s now come to an end, it will nonetheless remain on your credit report for six years after completion. This means that when a lender runs a credit check on you, they’ll see the IVA. An Individual Voluntary Agreement can furthermore impact your credit rating during this time.
Some lenders may reject your application if you have an IVA in your credit file, even if it’s ended. But many car finance providers will consider your application on an individual basis, and may be able to help. There are also lenders who specialise in IVA vehicle finance.
Car Finance Options Available During an IVA
Whilst on an IVA, you are unlikely to be able to take out a Personal Contract Purchase (PCP) agreement, so would need to look into Hire Purchase (HP) contracts.
A hire purchase agreement is where you would agree to fixed monthly payments towards the cost of the vehicle, usually over the period of one to five years. It works like any other type of secured loan, allowing you to spread the cost of the car over a timescale that suits you.
One of the advantages of hire purchase is that the payments tend to be fairly flexible, depending on your budget. With HP, you also own the car outright once the agreement comes to an end. The drawback of hire purchase, especially for those with a limited budget due to an IVA, is that the monthly instalments are typically fairly high.
Hire Purchase (HP)
A hire purchase agreement is where you would agree to fixed monthly payments towards the cost of the vehicle, usually over the period of one to five years. It works like any other type of secured loan, allowing you to spread the cost of the car over a timescale that suits you.
One of the advantages of hire purchase is that the payments tend to be fairly flexible, depending on your budget. With HP, you also own the car outright once the agreement comes to an end. The drawback of hire purchase, especially for those with a limited budget due to an IVA, is that the monthly instalments are typically higher than with PCP.
Applying for Car Finance While in an IVA
If you’re able to get approval for taking out car finance from your Insolvency Practitioner, you can then apply for a loan. It is, however, important to bear in mind that when borrowing vehicle finance, credit checks are standard. As an IVA will undoubtedly lower your credit rating, you may need to opt for a lender who specialises in bad credit car loans.
We perform a soft credit check when you make an application, which won’t affect your credit score. We’ll then compare the finance providers in our network and do our best to find a suitable lender who can help, regardless of your credit history.
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