Can I get car finance after an IVA?
If you do choose to enter into an IVA, accessing any kind of credit will be more challenging, even once the agreement ends. That includes car finance.
In this article, we’ll explore how an IVA impacts your ability to get a car finance agreement, and the options available to someone who has previously been in an IVA.
What is car finance?
Car finance is a contract that allows you to purchase a car by making periodic payments. If you want a vehicle but don’t have enough money to buy it outright, a finance agreement may be the best solution.
You take out finance on a vehicle by borrowing credit from a lender and repaying the total amount of cost over time. If you make your payments on time, you may have the option to purchase the car outright at the conclusion of your loan agreement, or return it and go somewhere else.
Does an IVA affect my ability to get car finance?
Yes, any type of borrowing is affected by being in an IVA. You usually need the approval of the Insolvency Practitioner (IP) dealing with your case to obtain credit worth more than £500 if you’re still in your IVA, so you will definitely need their agreement if you want to get automobile financing.
If you don’t get the permission of your Insolvency Practitioner before you get car finance, you could be in breach of the terms of your Individual Voluntary Agreement. This can lead to your IVA failing.
Once you have reached the end of your IVA, you will no longer need the permission of an Insolvency Practitioner in order to get a car finance agreement, however car finance companies may be reluctant to lend to you.
Why does having an IVA make it harder to get car finance?
As you are aware, an Individual Voluntary Agreement is a type of insolvency, which means the terms of the agreement are kept on the formal Insolvency Register as well as your credit file.
Details of your IVA are held publicly and will lower your credit score. An IVA also gives an indication to lenders that you have struggled with ‘bad credit’ in the past, so mainstream lenders are more cautious when it comes to entering a finance agreement with people post-IVA.
Is there car finance for people with bad credit?
New There are companies out there which specialise in providing car finance to customers with poor credit scores. Businesses like Red Potato or moneybarn target people with bad credit, or histories of struggling to manage debt.
Their appeal is obvious. They make it possible for customers to access car finance, even if they have:
- An existing IVA
- A previous IVA
- County Court Judgements (CCJ)
- Been declared bankrupt
- Been unable to raise a deposit for the vehicle
Just because it’s possible, however, doesn’t mean it’s recommended. It’s important to be cautious when approaching lenders like these – borrowing money when you have a poor credit history can be very expensive.
If you have a CCJ taken out against you, for example, a specialist lender knows you won’t get finance elsewhere. They will use that CCJ to charge you higher premiums, and make you pay more to finance your vehicle than you would anywhere else.
What’s the best way to get car finance after an IVA?
When you make your final payment, the details of your IVA will be removed from the Insolvency Register. It will stay on your credit report for a year after your arrangement ends, depending on if your IVA lasts five years or six.
Even though you no longer need anyone’s permission to apply for credit, having an IVA listed on your credit report can make it challenging to find a suitable lender.
In this instance, waiting until you have rebuilt your credit score before applying for car finance is the best option, as you will be able to access better deals.
Parkfield Insolvency will not charge you a fee for initial information and signposting. If you were to proceed and implement a recommended debt solution where fees are applicable, full details will be provided before setting up. Parkfield Insolvency proposes and administers Individual Voluntary Arrangements (IVAs). Advice is provided on the basis that there is reasonable contemplation of an insolvency appointment, once it is apparent that an IVA is likely to be the most appropriate debt solution. The debt solutions offered by Parkfield Insolvency Limited only apply to residents of England, and Wales.
Parkfield Insolvency is a trading style of Parkfield Insolvency Limited, Company Number 14371483, registered in England and Wales, at Dalton House, Cross Street, Sale, M33 7AR.
Peter Jackson is authorised by the Insolvency Practitioners Association to act as a Licensed Insolvency Practitioner.
To qualify for an IVA with Parkfield Insolvency, you must have a minimum of £6,000 of qualifying unsecured debt owed to two or more creditors
There is potentially a debt write off in some IVAs. However, the amount of debt written off differs for each customer depending upon their individual financial circumstances and is subject to the approval of their creditors.
Data Protection Act Registration Number – ZB399874. To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.
