Can I get car finance with an IVA?
Key points
An Individual Voluntary Arrangement (IVA) is a form of debt resolution that involves a legal agreement between a debtor and creditors, typically lasting five years
Finding car finance with an IVA is challenging but specialised lenders may consider applications with full transparency about the IVA
An IVA affects your credit score for six years from its start, influencing interest rates and terms on car finance deals
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legal framework for managing debt. It represents a formal agreement between a debtor and their creditors, aimed at settling debts within a predetermined timeframe.
The process of establishing an IVA usually involves an insolvency practitioner (IP) who serves as a mediator, assisting in drafting the proposal for creditor approval.
Once in place, the IVA outlines the debtor's repayment approach, typically involving monthly payments over a five-year span. Learn more about individual voluntary arrangements with our guide to IVAs.
How long does an IVA stay on my credit file for?
An Individual Voluntary Arrangement (IVA) generally remains on your credit file for six years from the date it starts. During this period, your credit rating will likely be negatively affected, making it challenging to obtain new credit.
Here is how your credit report is affected throughout an IVA process:
During the IVA
Your credit score will be damaged and it will be difficult to get approved for most forms of credit
After the IVA
Once the IVA is complete, it will be marked as such on your credit file, which may increase your chances of getting credit
After six years
The IVA will be automatically removed from your credit file
Once the IVA is completed, it is still listed on your credit report for the remaining six years. At this point, you can start taking steps to rebuild your credit score.
This includes taking out small lines of credit and consistently meeting monthly repayments to gradually improve your credit history.
Can I get a car finance deal with an IVA?
While it is possible to get a car on finance during an IVA, it's quite difficult. Your credit report will show the IVA, and even if your insolvency practitioner approves the expense, lenders may be reluctant to enter into a finance agreement with you.
However, some lenders specialise in car finance for those with poor credit, including IVAs. These types of lenders assess your financial situation beyond just your credit score and may be able to help you find a car finance agreement.
How will an IVA affect the car finance deal I can get?
Having an Individual Voluntary Arrangement (IVA) alters your car finance eligibility. Here's how an IVA might affect your options:
Higher interest rates and stricter loan terms
An IVA generally makes you a higher risk to lenders. This often leads to higher interest rates and stricter loan terms. You may face a shorter repayment period. The amount you can borrow might also be limited.
Less options available
Without an IVA, you'll likely access a wider range of cars and finance options. These options often come with more competitive rates. In contrast, with an IVA, your choices are more restricted. They are often limited to lenders specialising in bad credit car finance.
You may need written permission
You'll usually need written permission from your Insolvency Practitioner (IP) before you can take out a car loan.
What consent do I need from my Insolvency Practitioner (IP)?
When you enter into an IVA, you agree to follow strict financial rules designed to protect your creditors, which means you usually need your Insolvency Practitioner’s permission before taking on any new credit, including car finance.
Your IP will typically look at:
Whether the car is necessary, for example for work, caring responsibilities or essential travel
The monthly cost, ensuring the payments fit within your agreed IVA budget
The value of the car, with modest, practical vehicles far more likely to be approved than high-value or luxury models
The type of finance, as some IPs prefer simpler agreements like Hire Purchase over more complex PCP deals
The length of the agreement, which should not extend beyond the IVA without approval
Without written consent, taking out car finance could put your IVA at risk.
Paying your car deposit during an IVA
If you’re taking out car finance while in an IVA, any deposit must be carefully sourced to avoid breaching your agreement.
Typically, you cannot use money that should be going to creditors. This includes savings or income already included in your IVA payments. Acceptable sources include:
Gifts from family or friends not intended to be repaid
Part-exchange value from a previous car
Money outside the IVA, such as personal savings not included in the repayment plan
Always check with your Insolvency Practitioner before paying a deposit. Using restricted funds could be seen as non-compliance and put your IVA at risk.
Can I get a car finance deal with a poor credit score?
Yes, it's possible to get car finance with a poor credit score, but it may be more difficult.
Some lenders will refuse to offer you the funds to buy a car because they'll view you as a higher risk because of your poor or incomplete credit history.
You may get offered car finance by specific lenders but these will come with higher interest rates.
These providers offer solutions that traditional banks might not and consider factors beyond your credit score, like your current income and employment stability.
If you're struggling to get finance on a car, consider the following if possible:
Increase your deposit
The more money you can put down, the more likely you are to get approved
Use a guarantor
A guarantor is someone who agrees to pay off your loan if you can't
Pay on time
Paying your car finance off in full and on time each month can improve your credit score over time
Consistently paying bills on time and reducing outstanding debt can also help. This can improve your chances of securing better finance terms down the line.
Can I still get a loan if I have an IVA?
You need to consult with your insolvency practitioner before taking out any further credit, such as a personal loan, during an IVA.
Your IP will most likely advise against taking out a loan during this time, as you'll face higher interest rates from lenders and may struggle to get your finances back on track.
Can I get monthly car insurance with an IVA?
Yes, you can get monthly car insurance with an IVA, but it may be more difficult to find competitively priced insurance.
Insurers use your credit score as a factor when determining premiums, so you may have to seek car insurance from specialist providers, which means paying more or settling for less cover.
Will my car be treated as an asset in an IVA?
In an IVA, your car may be assessed as an asset, particularly if it is considered high value or not essential. Many everyday cars are not treated as assets, but more expensive or luxury vehicles could be viewed as something that could be sold to help repay your debts.
Here are some key factors that are usually taken into account:
Value
Cars worth around £6,000 or less are often allowed, but higher-value vehicles may need to be justified or replaced with a cheaper alternative
Necessity
If you need your car for work, caring responsibilities or essential travel, you are more likely to be allowed to keep it
Hire Purchase (HP)
If your car is still on HP, you can usually keep it provided the payments are affordable and the car is not excessive in value. Once the HP ends and the car is fully paid off, the freed-up monthly payment is typically added to your IVA contributions
Be responsible
Getting car finance while you’re in an IVA should be approached with caution. A car can be essential for work, caring responsibilities or day-to-day family life, but taking on a large new credit commitment can work against the aim of getting back on track financially.
Other useful guides
Looking for more help to make a decision on car finance? Read on with our selection of guides.
Compare MoneySuperMarket car finance deals
You can compare car finance deals with our partner Motiv. It’s an online service that allows you to see if you’re eligible for hire purchase (HP) and personal contract purchase (PCP) deals and the rates you’ll pay.
It only takes a few minutes to enter your details and compare offers, it is free and searching for a deal won’t harm your credit score.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
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Collette Shackleton is a highly skilled Content Writer who has over nine years’ experience creating helpful and engaging personal finance content for consumers. Collette shares her experience as a...
