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Can I Get Car Finance If I Have an IVA?

If you’re currently in an "individual voluntary arrangement" or IVA, you may be asking, “can I get car finance with an IVA?” 🤔  It may be more tricky, but It may not completely ruin your chances of getting approved for car finance. However, your credit records will definitely affect the lender’s decision. 

Having an IVA shouldn’t necessarily stop you from applying for car finance. There’s no rule that states you can’t. However, there are more hoops to jump through as you you will need approval, and you have to do your best to improve your financial situation and show you have a commitment to meet your payment obligations.

What is an IVA?

People who have difficulty paying off their debts sometimes choose an individual voluntary arrangement or IVA to settle them. Usually, these people are having difficulties when it comes to keeping up with their payments to their lenders.

With an IVA, they can have a contract with their lenders via a third party, and they will be given a chance to repay their debts through regular instalments over a certain period. 

When there is already an agreement like an IVA, lenders can no longer take any further legal actions against the person who owes them the money since repayments are already being made. These repayments need to be completed within a specific period. Once the IVA is completed it will be removed after three months from the Individual Insolvency Register. 

However, it will take six years before the IVA can be removed from one’s credit report, starting on the date when the agreement began. When the IVA is finished, it will be added to the credit report of the person. 

During the period when the IVA is still ongoing, written permission is required from the Insolvency Practitioner handling the agreement if the person needs to borrow an amount above £500.

In this case, if you want to get car financing, you would have to talk to the Insolvency Practitioner. They will want to know why you need a car - for example, do you need it to get to work?

Can I Get Car Finance with an IVA?

Your credit score and credit history are crucial factors when lenders are evaluating your car finance application. While your credit history is important, there are other factors that lenders look into such as the amount you want to borrow, the loan term, and the affordability of the repayments. Car finance companies consider all these factors when you apply for car finance

Having an IVA on your record does not mean you can no longer apply for car financing. However, lenders may see you as a high-risk borrower. They may reject your application or offer deals with higher interest rates. It may be wise to take your time so you can improve your credit score first before applying for car finance. This way, you’ll have better chances of getting approved. 

How to Get My Car Finance Application Approved?

When you’ve completed your IVA, it will appear on your credit report. Car finance companies will check the credit reports of individuals who apply for financing. Seeing an IVA on your credit history may give the impression that you’ve had difficulties keeping up with your repayments in the past. 

However, this does not automatically mean your application for car finance will be rejected. Some lenders may see the IVA as your way of becoming a more responsible borrower by making the steps to settle your debts with other creditors. 

What’s important is for you to continue demonstrating that you are capable of repaying the debts you owe. Here are other steps you can take to improve your credit score. 

Register to Vote

If you’re not registered on the electoral roll yet, find time to do so because you’ll find that it will be much harder for you to acquire car financing. You can start by going to gov.uk so you can learn more about how you can register to vote through an online process. 

Check for Errors on Your Credit Report

Look at the details of your credit report such as your name and address. These pieces of information should be accurate and specific. If your address is incorrect, it can negatively affect your credit score. If you see any errors, be sure the report them immediately to the credit reference agency so that they can be corrected. 

Check for Any Suspicious Transactions

While you’re checking your credit report, also look at the transactions. You’re probably familiar with most of the transactions recorded there. If you see something that’s not quite right or you’re unfamiliar with it, it could be a fraudulent transaction. You can reach out to the credit reference agency and report it right away. 

Pay Bills on Time Every Time

You may have had some bad records when it comes to paying bills on time. However, don’t be discouraged because you can always improve. Start by paying your utility bills, phone, and internet bills on time.

Along with that, be sure that you’re never late in paying your credit card bills as well. Set up a reminder on your phone if you're likely to forget the due date! Having this change in your record will show lenders that you’re capable of becoming a more responsible borrower. 

Pay Off Your Existing Debt

While there’s no rule that says you can’t get car finance with an IVA, it would be best for you to pay off your existing debts first. By the time you’ve finished the IVA and practised being more responsible with your finances, you would have been able to demonstrate that you’re now better at handling money. 

Takeaway

It takes time to build a good credit history and credit score. You may have had some financial difficulties in the past but that doesn’t mean you can no longer improve your record.

Before you apply for car finance, see to it that you have the best chances of getting approved. If your application is rejected, don’t apply for car financing right away because the hard checks that lenders make will adversely affect your credit score. 

Take all the time that you need to work on improving your credit rating. Once you’ve finished your IVA and you’re more confident about your ability to repay your debts, you can start working on your application for car finance. 😀

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