Can I get car financing 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.
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.
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 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.
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.
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 money for less cover.
Can I sell my car during an IVA?
It depends on whether your car is listed as an asset in your IVA paperwork. Most cars aren't and if it's not a high value or luxury vehicle, you can keep your car or sell it if you wish.
Here are some things to consider:
Value: You can usually keep a car that's worth up to £6,000. For more expensive cars, your creditors may ask why you need it and if you could buy a cheaper car instead.
Necessity :You can usually keep a car if it's necessary for work or family reasons.
Hire Purchase (HP) agreement: You can usually keep a car that you bought using an HP agreement, as long as the monthly payments are reasonable and the value isn't excessive. However, when your HP agreement ends, the money you were paying towards it will need to be added to your IVA.
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.
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Victoria Russell
General Manager - Commercial
Vikki has worked across financial services for over 20years, and for the last 15 years, created and nurtured a career within MoneySuperMarket Group, leading to her current role as General Manager for...
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Collette Shackleton
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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...
