Buying a car on finance during an IVA is possible. However you will have to use a specialist finance provider. You will also need to get agreement from your IVA company.
Included in this article:
- How to get car finance during an IVA
- Do you have to inform your IVA company?
- Can you reduce your IVA payment to pay for car finance?
- Can your partner take out a car finance agreement for you?
Want help to start an IVA? Give us a call (0800 077 6180) or complete the form below. The advice is free and confidential
How to get car finance during an IVA
A key issue with applying for car finance when your are in an IVA is your poor credit rating. If you try to use a mainstream lender, you will likely fail their credit check and they will be unable to help.
If you are coming to the end of a agreement you set up before your IVA started and want to take out a new one, the finance company will still have do a new credit check on you. As a result, it is unlikely they will be able to help despite the fact you have been with them for the past few years.
So what can you do? The answer is you will need to use a so called sub-prime lender.
There are a number of different companies to choose from. The best way to find them is by searching on line for “sub prime car finance”.
Most of these organisations are reputable. The main downside with using them is that the rate of interest they charge is much higher than standard lenders. This means your monthly payment for a similarly priced car is going to be far higher then if you were not in an IVA and had a good credit score.
Before taking on a new car finance agreement, you must ensure you can afford both the monthly payment and your IVA.
Do you have to inform your IVA company?
Yes. In fact many sub-prime lenders will insist on getting a letter from your IVA company confirming you are allowed to sign up to the new car finance agreement before they will lend to you.
The main concern is whether you will be able to afford to pay the agreement as well as your current IVA. You will need to review your income and living expenses budget to check this before making any decision.
If you already have car finance, you will know what your monthly payment budget is. As long as you keep within this, your IVA company should not have a problem. Ultimately, their main concern is that you can maintain your agreed monthly payment.
There will be more of a challenge if you don’t currently car finance. Adding a monthly car payment to your living expenses budget when there was non before will almost certainly affect your ability to pay your IVA.
Can you reduce your IVA payments to pay for car finance?
You may want to get a car on finance, but will be unable to pay for both the new agreement and your IVA. In these circumstances, you must speak to your IVA company about reducing your IVA payment.
Generally speaking they will not want to do this. However, they might be able to help if you simply have to get a car to get to work and you have no other option. The argument would be that if you can’t work, you would lose your job and your IVA would likely fail. That would be in nobody’s interest.
If it is possible to reduce your payments, in return you are likely to have to accept an extension of the Arrangement to compensate the creditors.
Your IVA company is only likely accept a reduction in your payment to accommodate a car finance agreement in very limited circumstances. It is certainly not an option they will automatically agree to.
It is extremely unlikely that you will be able to reduce your IVA payments where you are already paying the minimum amount required (£100/mth or less).
Can your partner take out a car finance agreement for you?
One way around the issues associated with getting car finance during an IVA is for your partner to take out the agreement in their name. This can have significant advantages if their credit rating is good.
Firstly, they may well qualify for finance with a main stream lender. This will make it cheaper and reduce the monthly payments.
Secondly, they do not need permission from your IVA company to take out the agreement.
But, you still need to make sure the monthly finance payment is affordable.
Depending on your partner’s circumstances, you may need to transfer funds to their account each month to cover the payment. Before going ahead, make sure your ability to maintain your IVA payment won’t be affected.
Need more advice about getting car finance during an IVA? Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
Arrange a call with an IVA Expert
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.