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Understanding Individual Voluntary Arrangements (IVA) and Car Finance

Victoria Russell
Written by  Victoria Russell
5 min read
Updated: 05 Jun 2024

Key points

  • An Individual Voluntary Arrangement (IVA) is a formal debt resolution method that involves a legal agreement between a debtor and creditors, typically lasting five years

  • Obtaining car finance with an IVA is challenging due to credit limitations, but specialised lenders may consider applications with full transparency about the IVA

  • An IVA affects credit ratings for six years from its start, influencing interest rates and terms on car finance deals, with potential improvement strategies including larger deposits and credit score rehabilitation

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 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?

Obtaining car finance while under an Individual Voluntary Arrangement (IVA) presents unique challenges.

Let's explore the hurdles, potential lenders, and the importance of transparency during the application process.

Navigating IVA restrictions: An IVA typically limits your credit access. This limitation impacts your ability to secure car financing. Lenders view an IVA as a significant risk factor due to past financial difficulties

Lenders who may consider your application: Some lenders specialise in car finance for those with poor credit, including IVAs. These lenders assess your financial situation beyond just your credit score

The role of transparency: Being upfront about your IVA is crucial when applying for car finance. Honesty builds trust with potential lenders. It also helps them offer the most suitable finance options based on your current financial circumstances

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.

After the IVA is completed, it is still listed on your credit report for the remaining six years. You can start taking steps to rebuild your credit score.

Initiatives such as securing small lines of credit and consistently meeting repayments can gradually improve your credit standing.

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 influence your options:

  1. Typical changes in interest rates and loan terms due to an IVA: 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

  2. Comparison of car finance options available to individuals with and without an IVA: Without an IVA, you'll likely access a wider range of 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

  3. Strategies to secure better finance deals despite having an IVA: To secure a better car finance deal, consider saving for a larger deposit. This reduces your borrowing amount and shows financial responsibility. Regularly review your credit report and work on improving your credit score. Engaging with a financial adviser who understands car finance in an IVA context can also help

Can I get a car finance deal with a poor credit score?

Securing a car finance deal with a poor credit score might seem daunting, but it's not impossible. Your credit score is crucial in determining your eligibility.

Lenders assess your financial reliability using this score. If your score is low, you might be seen as a higher risk. This perception can make securing a favourable deal tougher.

However, alternative financing options exist for those with less-than-perfect credit. Consider lenders specialising in bad credit car finance.

These providers offer solutions that traditional banks might not. They consider factors beyond your credit score, like your current income and employment stability.

Improving your credit score is a viable strategy for better car finance options in the future. Start by checking your credit report for inaccuracies and dispute them if necessary.

Consistently paying bills on time and reducing outstanding debt can also help. This proactive approach can enhance your chances of obtaining more favourable finance terms down the line.

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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 HP and 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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