Can I get car finance with an IVA?

An individual voluntary arrangement (IVA) is a form of insolvency for those struggling with debt. If you have an IVA, taking out more credit over £500 isn’t normally possible – unless you get written permission from your insolvency practitioner (IP).

7 min read
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What is an IVA? 

An individual voluntary arrangement (IVA) is a legally binding debt solution between you and your creditors. You pay an agreed percentage of your debt off, over a fixed period (usually five or six years). After that time, any remaining debt will be written off.

You make the payments to your IVA company who distributes the funds and deals with your creditors on your behalf. Any further collections action is stopped.

An IVA may be a suitable option for those who:

  • owe more than £10,000
  • have a least two different creditors
  • don’t want to deal with their creditors directly
  • can afford the IVA payments each month for the full length of the agreement

Getting an IVA shouldn’t be taken lightly though, as it’s a legally binding agreement and can affect your job (depending on what industry you work in), as well as your home, assets and credit rating. Make sure you consider all the risks involved and explore alternative options before you enter into an IVA.

Visit the Citizen’s Advice website to find out about the risks and costs of getting an IVA, or contact a free debt charity like StepChange for more information.

Can I get a car on finance with an IVA?  

If you’re already in an IVA, you aren’t normally allowed to borrow any further credit over £500 (including car finance). Additional borrowing won’t be included in your agreement and could affect your affordability and cause your IVA to fail.

However, in rare circumstances, you may be able to get a car on finance with an IVA – if you get written permission from your insolvency practitioner (IP) first.

Whether your IP agrees may depend on whether you can afford to make the car finance repayments on top of your IVA payments. They may also consider how necessary it is for you to get a car and suggest alternative options such as public transport.

It’s important to weigh up whether getting a car is essential and consider if it would put you in any further financial difficulty.

If your IP doesn’t give you their permission to get car finance, don’t go ahead anyway, as this will breach the terms of your agreement, which can cause your IVA to fail.

Can you pass a credit check with an IVA? 

If your IP grants you permission to get car finance when on an IVA, you may still struggle to get accepted. Whether you can pass a credit check with an IVA will depend on:

  • the lender
  • your individual circumstances.

Being in an IVA can make it more difficult to get all types of credit – not just car finance. This is because it stays on your credit report for six years from the date the arrangement is agreed upon.

Lenders may worry that you won’t be able to afford more credit on top of your current outgoings. Some may decline your application straight away because they may see you as being too high risk based on your financial past. But there are some lenders that specialise in car finance for those with bad credit – however, they may charge higher interest rates, which could be expensive.

What car finance options are available during my IVA? 

There are lots of different car finance options to consider. Again, whether you are eligible will depend on your individual circumstances and the lender. Plus, you’ll need permission from your IP.

Can I get hire purchase with an IVA? 

Hire purchase (HP) agreements allow you to spread the cost of a new or used car over several years. You make an initial deposit followed by monthly repayments to pay off the car’s full value. Once you’ve made all the repayments, you become the legal owner of the vehicle.

HP agreements can be one of the more expensive car finance options month-to-month, as you’re paying off the full value of the car (and interest). As such, while it may be possible to get an HP agreement with an IVA, it’s likely your IP would suggest you go for a cheaper alternative.

Can I get personal contract purchase? 

Personal contract purchase finance (PCP) is similar to HP in that you pay a deposit followed by monthly repayments (including interest) as a way of spreading the cost of the car. However, with PCP, the monthly repayments only cover the difference between the value of the car at the start and the end of the agreement - not its full value.

This tends to make the monthly repayments cheaper than HP, but if you want to become the legal owner of the vehicle, you’ll have to make what’s known as a ‘balloon payment' at the end of your agreement. Or you can simply hand the car back to the dealership.

If you’re on an IVA, you may struggle to get approval from your IP for personal contract purchase, as the monthly repayments can be costly - not to mention the lump sum balloon payment if you want to buy the car at the end.

What about personal contract hire? 

With personal contract hire (PCH), or car leasing, the repayments tend to be lower per month compared to HP and PCP. This is because you’re essentially renting the vehicle for a set period - instead of paying off the cost of the car. So, it may be a good option if you’re on an IVA – but remember, you must get permission from your IP first.

Bear in mind, with car leasing, you don’t own the car at any point. At the end of your agreement, you return the car and walk away.

Can I get a personal loan with an IVA? 

Personal loans are a popular way of financing a car because you own the car outright. This is because you buy it upfront using the money from the loan, and then you pay the loan back over a fixed amount of time.

If you’re in an IVA, it can be challenging to get approved for a personal loan, as mainstream lenders are often cautious to lend to those with a bad credit history. So, you may have to seek out a specialist lender – however, this could cost you more in interest and you may be limited as to how much you can borrow. Always remember to get approval from your IP first.

Can I keep my car on finance with an IVA? 

Depending on your individual circumstances, you may be able to keep your car on finance with an IVA. But there are certain situations where your IP may ask you to sell your car so you can put the money towards your debts.

For instance, if you have a personal loan that you used to buy your car, this will be factored into your IVA and paid off through the plan. However, if you have a PCP, HP, or PCH agreement, your insolvency practitioner may request that you look at options for terminating the agreement early.

At the end of the day, your IP wants to make sure that you are contributing as much money as you can afford towards your IVA.

Can I get car finance after an IVA? 

Getting car finance after an IVA may be easier in terms of not having to seek the approval of your IP, but it may still be challenging in that your IVA will remain on your credit report for six years from the date the IVA is agreed - which could deter potential lenders.

The best way to improve your chances of getting car finance after an IVA is to keep on top of all your repayments, rebuild your credit score as much as you can, and only take out finance if it’s essential to do so.

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*Representative example: Borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. Rates may differ as they are dependent on individual circumstances. Subject to status. We're a credit broker, not a lender.