Can I still get finance with an IVA?
26 September 2023
By Joy Pearson
Individual Voluntary Arrangements (IVAs) provide a structured path for individuals to manage their debts and regain control of their finances. While an IVA offers a fresh start, it can impact various aspects of your financial life, including your ability to secure car finance. In today's post, we'll delve into IVA car finance, how it differs from traditional car finance, what you should have when applying, and whether obtaining car finance is possible with an active IVA.
An Individual Voluntary Arrangement (IVA) is a formal agreement between an individual and their creditors to repay debts over a specified period, usually 5-6 years. During this time, individuals make affordable monthly payments based on their disposable income, and any remaining debt is typically written off at the end of the IVA term. While an IVA can provide much-needed financial relief, it's essential to understand how it affects your ability to obtain car finance.
IVA car finance differs significantly from traditional car finance in several ways. The most notable distinction is the impact on your credit history. During an IVA, your credit score is likely to be adversely affected, making it challenging to qualify for mainstream car loans. Traditional lenders may view your financial situation as high-risk, resulting in higher interest rates or outright rejection. However, specialized lenders offering IVA car finance cater specifically to individuals with IVAs on their financial records. These lenders understand the unique circumstances surrounding IVAs and are more willing to work with applications who have this debt management solution in place. This presents an opportunity for individuals with active IVAs to secure car finance tailored to their needs.
When applying for car finance with an IVA, being well-prepared with the necessary documentation and considerations is crucial. You'll need to provide evidence of your active IVA, including the IVA proposal and approval documents, to demonstrate your commitment to responsible financial management. Lenders will thoroughly assess your financial situation, especially your disposable income, so it's essential to prepare detailed documentation outlining your income sources and monthly expenses to support your application. Additionally, proof of your current and previous addresses, usually spanning the past 3 years, may be required to verify your identity and residential stability. Having a valid driver's license is another essential requirement to prove your eligibility for car finance and legal ability to operate the vehicle. Lastly, lenders will conduct an affordability assessment to ensure the car finance agreement aligns with your unique financial circumstances, so providing accurate and comprehensive financial information is vital for a successful application.
Obtaining car finance with an active iVA is indeed possible, but there are essential factors to keep in mind. Firstly, it's advisable to approach specialized lenders who specifically cater to individuals with IVAs. These lenders have a deeper understanding of your unique financial circumstances and are more likely to offer terms that align with your needs. However, it's essential to be aware that car finance with an IVA might come with higher interest rates compared to those offered to borrowers with excellent credit. This is because IVAs carry an increased level of risk for lenders. Therefore, it's crucial to review the loan terms carefully and assess the affordability of the car finance agreement to ensure it fits within your budget. Moreover, it's worth noting that while securing car finance with an IVA is feasible, your options may be somewhat limited in comparison to borrowers with strong credit histories. You may need to make certain compromises, such as considering different types of vehicles or adjusting your preferences regarding loan terms, to ensure they are in line with your financial capabilities.
Obtaining car finance with an IVA is achievable, but it requires a tailored approach. By understanding the differences between IVA car finance and traditional car finance, preparing the necessary documentation and working with specialized lenders, you can take steps toward securing the vehicle you need while responsibly managing your financial commitments.