Car finance
with an IVA

Looking for car finance while under an Individual Voluntary Arrangement? This guide explains your options and helps you make informed decisions about getting a vehicle during debt management.

What is an IVA?

An Individual Voluntary Arrangement is a legal agreement between you and your creditors. It lets you pay off debts through affordable monthly payments, typically over 5-6 years. Many people find it helpful that a portion of their debt gets written off after successful completion.

A licensed Insolvency Practitioner manages your IVA, handling communications between you and your creditors. Unlike bankruptcy, you maintain control of your assets while resolving your debts.

How does an IVA work?

The process starts when an Insolvency Practitioner reviews your finances. They'll work out monthly payments that balance your income against essential living costs and total debt.

Throughout your IVA:

• Your monthly payments get shared among creditors based on agreed percentages
• Your income and expenses undergo regular reviews to adjust payments if needed
• You're protected from creditors taking direct action against you
• You need permission before taking on new credit

Keep up with your payments and follow the terms, and you'll be debt-free when your IVA ends. Any remaining eligible debts are written off, giving you a fresh financial start.

Does an IVA affect car finance?

Yes, an IVA impacts your car finance options. Lenders will see your IVA on credit reports for 6 years from its start date. While this makes approval harder, specialized lenders offer solutions for people in active IVAs.

Key effects include:

• Higher interest rates due to increased lending risk
• Larger deposit requirements from most lenders
• Need for extra paperwork proving affordability
• Required permission from your Insolvency Practitioner

You'll need to show you can afford both your IVA payments and car finance. Work out a detailed monthly budget before applying.

Can I keep my car on finance during an IVA?

If you already have a financed car when starting an IVA, you might be able to keep it. Your Insolvency Practitioner will look at whether you need the car and if payments fit your budget.

They'll consider:

• Whether you need the car for work or family commitments
• If payments fit within your IVA budget
• How much you still owe on the finance
• Available public transport alternatives

Most IVA providers let you keep your car if it's essential and payments are manageable. They might help negotiate with your finance company if needed.

Can I get car finance after an IVA?

Getting car finance becomes easier after completing your IVA, though some effects on your credit remain. Lenders look more favorably on applications when you've successfully finished your debt management plan.

Ways to improve your chances:

• Show regular income and stable employment
• Save for a larger deposit
• Build new credit history with a credit-builder card
• Keep all bills paid on time

Your options expand significantly once the IVA drops off your credit report after six years.

How long after an IVA can I get car finance?

You can usually apply for car finance 6 months after completing your IVA. Better rates typically become available after 12-24 months. The IVA stays on your credit file for 6 years from its start date.

Timeline guide:

• 0-6 months: Limited options with specialist lenders
• 6-12 months: More lenders available but higher rates
• 1-2 years: Improving terms and acceptance rates
• After 6 years: Full market access possible

Focus on rebuilding your credit score during this period to access better deals.

Can I lease a car if I am in an IVA?

Leasing during an IVA is possible through specialist companies. You'll need permission from your Insolvency Practitioner and proof you can afford the payments.

What to expect:

• Higher initial payments than standard leases
• Shorter contract lengths available
• Stricter mileage limits
• Required maintenance packages

Compare total costs carefully - leasing isn't always cheaper than other finance options.

Does an IVA affect my credit score?

An IVA significantly impacts your credit score, typically dropping it by 200-300 points. The record stays on your credit file for six years from the start date.

Key impacts:

• Major credit score reduction when IVA starts
• Limited access to standard loans and credit cards
• Higher interest rates on any approved credit
• Six-year recovery period needed

Your credit score starts improving once you complete the IVA and establish a new positive payment history.

What happens to my car if I enter an IVA?

Your Insolvency Practitioner assesses your car's value and necessity when setting up your IVA. Most people keep their cars if they need them for work or family.

Assessment factors:

• Car's current market value
• Essential need for transport
• Monthly running costs
• Any equity that could pay creditors

Keep track of all car-related expenses - you'll need to include them in your IVA budget.

How to apply for car finance with an IVA

Start by getting written permission from your Insolvency Practitioner. This is essential - skipping this step means automatic rejection.

Application steps:

• Write to your IP explaining why you need a car
• Provide proof of income and expenses
• Show quotes from suitable lenders
• Document your transport needs

Apply only to lenders specializing in IVA situations to avoid unnecessary credit checks.

What does an IVA stop you from doing?

An IVA places specific restrictions on your finances to protect the arrangement. Breaking these rules could end your IVA.

Key restrictions:

• No new credit over £500 without permission
• Can't run a business without telling your IP
• Must declare any windfall money or inheritance
• Can't sell valuable assets without approval

Stay in regular contact with your IP to avoid accidental breaches.

Is an IVA a good idea?

An IVA works best if you have regular income and owe at least £5,000. It's not right for everyone.

Consider these points:

• Monthly payments must be reliable
• Affects credit rating for 6 years
• Some debts can't be included
• May need to sell valuable assets

Talk to a free debt advisor before deciding - they'll help you explore all options.

What to watch out for when financing a car during an IVA?

Check terms carefully before signing any finance agreement. High interest rates and fees can make monthly payments unaffordable.

Watch for:

• Hidden charges or early repayment penalties
• Unrealistic mileage restrictions
• Total cost including all fees
• Flexibility if your circumstances change

Get everything in writing and review it with your IP before signing.