Car finance after an IVA
When you enter into an Individual Voluntary Arrangement (IVA), you’re showing that you can’t afford to repay your debts and are taking action to avoid bankruptcy. Because of this, it will be very unlikely that creditors will lend you more money until you’ve finished paying off your debts.
Once you’ve come to the end of your IVA agreement and you’ve fully paid off your debts, you’re more likely to be approved for car finance.
If you’d like to apply for car finance while still in an IVA, you’ll need to discuss this with your insolvency practitioner, and you will find it harder to be approved by a lender.
How long will an IVA stay on my credit file?
The IVA will usually remain on your credit file for six years from the date the IVA starts, so it will be easier to get approved for car finance after this point.
As the IVA will show up on your credit report, lenders might be worried that you’ll struggle to pay your car finance. You may be offered the car finance, just with higher levels of interest, but this will depend on your specific situation.
What is an Individual Voluntary Agreement?
An Individual Voluntary Arrangement (IVA) is an agreement between you and your creditors to pay back your debts over a period of time. It’s a court-agreed arrangement that will require you to make regular payments until your debts are all paid off.
This agreement is put together to avoid bankruptcy and to work towards clearing your debts.
Can I get car finance after an IVA?
You can apply for car finance after an IVA, but it might be trickier with the IVA showing up on your credit file. Once your IVA is completed, you’ll be removed from the Individual Insolvency Register after three months. The IVA will stay on your credit report for six years from the start of the agreement.
While you’re in an ongoing IVA, you’ll be restricted on what you can borrow. This usually means that you can only borrow up to £500 and will have to get this approved by your insolvency practitioner.
How to get car finance in an IVA
If you’re in an IVA, you’ll need written permission to borrow anything over £500, and this may not be granted as your insolvency practitioner will advise you that your priority should be to repay your existing debt.
If you were to be granted permission, lenders will be able to see that you’re subject to an IVA as you’ve been unable to meet your existing financial commitments, and will usually decline an application on these grounds.
It might be worth spending some time rebuilding your credit score and waiting for the IVA to be removed from your credit file, as this will make it more likely that you’ll be approved for car finance.
For more advice on IVAs, visit StepChange to learn more.
Will an IVA affect car finance?
When applying for car finance, the creditor will look into your credit report and your credit score.
Your credit score is likely to decrease as a result of an IVA, as this will show lenders that you have been struggling to repay debts.
Being in an IVA will make it much more difficult to get approved for car finance – you’d need written permission from your insolvency practitioner to borrow more than £500 and lenders will likely reject applications if they can see you’ve been unable to meet your existing commitments.
Can I get Hire Purchase car finance after an IVA?
Hire Purchase (HP) is a type of car finance where you put down a deposit and spread the remaining balance across monthly payments. Once your payments have finished and your contract comes to an end, you’ll have completely paid off your car and will be the legal owner.
You can get HP car finance after an IVA, but it might be difficult with the IVA showing up to lenders. This can make them see you as a higher-risk borrower, as you’ve previously struggled to manage your debts. You’re usually more likely to get approved for HP car finance when the IVA has been removed from your credit file.
Can I get Personal Contract Purchase car finance after an IVA?
Personal Contract Purchase (PCP) is a type of car finance that allows you to pay for your car monthly based on its depreciation, with an optional final balloon payment to take ownership of the car.
As PCP car finance providers will use your credit history to approve your finance application, it can be harder to fit their criteria if you have an IVA on your report. Waiting until the IVA has been removed is a good way to improve your chances of getting car finance.