An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to repay your debts over a set period. An IVA is a good way to manage debt, but it can make it harder to get financing for big purchases, like a car. This guide will give you a clear understanding if you’re wondering how an IVA will affect your car finance eligibility. We’ll also take a look at IVA car finance options with CarMoney and other brokers can help you find.
What is an IVA?
Before exploring car finance, it’s important to fully understand what an IVA entails. An IVA is a legally binding agreement that allows you to pay off a portion of your debts over a fixed period, usually 5-6 years. During this time, creditors agree to freeze interest and refrain from further collection efforts. However, having an IVA on your credit record can affect your ability to access finance, especially for larger purchases like cars.
How an IVA Affects Your Credit Score
If you enter into an IVA, the fact that you did is recorded on your credit file, usually for 6 years from the date of the arrangement. This means that the IVA will be marked against your credit history, and this can lower your credit score. A lower credit score makes it harder to get traditional car finance from banks or major lenders because they may see you as a high risk borrower.
Can You Get Car Finance with an IVA?
Yes, you can get car finance with an IVA but it is often more difficult and you need to understand your options. Even if a high street lender won’t approve your loan application, there are alternative routes. If you are looking for IVA car finance options, one of the best ways to find suitable financing options is through brokers or other specialists who can help people with poor credit or ongoing debt management issues.
The Challenges of Getting Car Finance with an IVA
You can still get approved for car finance, but there are a few things to take into account. The fact that an IVA indicates an unstable financial state means that many traditional lenders are wary of approving applications from people with an IVA. This means you could end up paying higher interest rates, have stricter terms, or pay a larger deposit. When exploring car finance options, it’s important to be prepared for these potential challenges.
Exploring IVA Car Finance Options
When you are looking for IVA car finance options, think about what types of loans are available to you. It’s worth finding out which lenders focus on people who are managing an IVA or have bad credit, as this can help you get a better deal.
Bad Credit Car Loans
One of the most popular solutions for people with an IVA is bad credit car loans. The interest rates on these loans are usually higher, since they are intended to compensate the lender for the risk. But they allow people with bad credit to access car finance. Before committing to a loan, it is important to compare offers and understand the terms.
Guarantor Car Loans
A guarantor car loan is another option to consider. This type of loan involves a trusted person with a better financial history agreeing to be responsible for the loan if you fail to meet the repayment terms. It lowers the lender’s risk and increases your chances of approval.
This is why guarantor loans sometimes have better terms, like lower interest rates and higher borrowing limits.
What to Consider When Applying for Car Finance During an IVA
If you are applying for car finance with an IVA, you need to think very carefully about your financial situation. Make sure you know how the loan will impact your monthly budget and that you’re able to afford the repayments and IVA contributions.
Understanding Loan Terms and Interest Rates
Because you may be paying a higher interest rate because of your IVA, it is important to shop around for the best deal. To calculate your monthly payments based on different loan amounts, interest rates, and terms, you can use a finance calculator. It can also help you to determine a loan that you can afford to pay yet still buy the car you need.
The Importance of a Realistic Budget
Before applying for car finance, it is important to set a realistic budget. While you may be excited about a new vehicle, it’s easy to overextend yourself on a car loan and put yourself at risk of not being able to keep up with your IVA payments. Always ensure that your car loan repayments do not exceed what you can afford to pay given your current financial commitments.
How to Improve Your Chances of Approval
If you’re having trouble getting car finance with an IVA, there are things you can do to increase your chances of approval. First, consider increasing your deposit. The larger deposit means you need to borrow less money and lenders are more likely to approve your application. In addition, make sure you are making your IVA payments and maintaining good financial habits, which will help improve your credit profile over time.
Consider Your Vehicle Choices
When you apply for car finance, it is also essential to keep in mind that the car’s value can also influence the approval of your loan. If you’re in the middle of an IVA, lenders may be more willing to finance a more affordable, reliable car rather than a luxury or high value vehicle. You can opt for a more modest vehicle, which will increase your chances of approval and keep you within your budget.
Exploring IVA Car Finance Options with CarMoney
Securing car finance with an IVA is harder, but it is possible. However, with IVA car finance options such as bad credit loans and guarantor loans, those with a poor credit history can still get the financing they need.
Using a car finance calculator, knowing your budget and checking all the options available, you can make an informed decision and ensure that your car loan is within your means without jeopardizing your financial recovery.
