Car Finance During Iva - Financial Tips

keeping car iva

Securing car finance during an Individual Voluntary Arrangement (IVA) presents significant challenges but isn’t entirely impossible. An IVA is a formal agreement with creditors to repay debts in affordable monthly installments, typically over five to six years. As such, it fundamentally impacts your credit rating, signaling to lenders that you’re currently managing debt under a structured plan. This automatically makes you a higher-risk borrower.

The primary hurdle is your severely impaired credit score. Traditional lenders, such as banks and credit unions, are unlikely to approve car loans during an IVA due to the perceived risk. They typically rely on credit scores and credit history to assess an applicant’s ability to repay the loan. An IVA severely dents both of these factors. Any missed payments during the IVA will further exacerbate the situation.

However, specialized lenders catering to individuals with poor credit histories do exist. These lenders understand the circumstances surrounding IVAs and may be more willing to offer car finance. Be prepared, however, for significantly higher interest rates and potentially stricter loan terms. This is because these lenders are taking on a greater risk and compensate for it through higher charges. The APR (Annual Percentage Rate) could be substantially higher than what’s available to those with good credit.

Before pursuing car finance during an IVA, obtaining permission from your Insolvency Practitioner (IP) is crucial. The IP oversees your IVA and ensures any new debt doesn’t jeopardize your ability to meet your existing IVA obligations. They will assess your affordability and the necessity of a new car. Providing a compelling reason, such as needing a car for employment or family responsibilities, will strengthen your case. The IP will also ensure that the proposed loan terms are reasonable and won’t negatively impact your IVA.

Consider alternatives to traditional car finance. Building a cash deposit, even a small one, can improve your chances of approval and potentially lower interest rates. Exploring lease options might also be a viable path, as lease agreements sometimes have less stringent credit requirements than car loans. Finally, if possible, postponing the purchase until after your IVA is completed is the most financially prudent course of action. Once your IVA is successfully concluded and your credit rating begins to recover, you’ll have access to more favorable finance options.

In summary, while car finance is difficult to secure during an IVA, it’s not always impossible. Approach specialized lenders, obtain your IP’s permission, prepare a deposit, and carefully weigh the costs against the benefits. Prioritize your IVA obligations above all else, and always seek independent financial advice before making any decisions.