Understanding an IVA

17 April 2023
By Joy Pearson
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If you're considering applying for car finance,it's important to understand what an Individual Voluntary Agreement (IVA) is and how it can affect your application. 

An IVA is a formal agreement between you and your creditors to repay your debts over a set period of time, usually five to six years. It's a way to avoid bankruptcy while still making a meaningful effort to pay off your debts. You'll make regular payments to an insolvency practitioner, who will distribute the money to your creditors. 

Having an IVA can affect your credit rating, which is one of the factors lenders consider when you apply for car finance. Your credit score reflects your ability to manage debt and make payments on time, so a lower score can make it more difficult to get approved for car finance, or result in higher interest rates. 

If you have an IVA, there are a few things to keep in mind when applying for car finance. The first thing to keep in mind is to be honest about your financial situation. When you apply for car finance, you'll need to disclose your income and any outstanding debts, including your IVA. Lying or omitting information can lead to your application being rejected, and could even be considered fraud. 

Another thing to consider is to find and work with a specialist lender. Some lenders specialize in working with customers who have poor credit or are in debt management program, like an IVA. These lenders may have higher interest rates, but they may be more likely to approve your application. Whilst in an IVA, it's important to work on improving your credit score. This can include making all your payments on time, keeping your balances low, and checking your credit score for errors. 

One last thing you could do if your struggling to get approved for car finance on your own, you may want to consider a guarantor loan. This is where someone else, like a family member of friend, agrees to make payments if your unable to. 

Ultimately, having an IVA doesn't mean you can't get approved for car finance, but it may require some extra effort and research. Be sure to shop around and compare lenders, and don't be afraid to ask for help or advice if you need it. With patience and persistence, you can still get the car you need while working towards a brighter financial future.