If you've entered into an Individual Voluntary Arrangement (IVA) due to financial hardship, obtaining car finance might seem out of reach. Yet, with the right approach, there are several pathways to secure car finance that can help you maintain mobility while also managing your debt. This blog post explores five car finance options available for individuals with IVAs, providing a roadmap for navigating this challenging landscape.
Option 1: Hire Purchase
Hire Purchase (HP) is a popular choice where you essentially rent the vehicle until you've paid off the full amount. Here’s how it works:
- Initial Deposit: You pay a deposit which usually ranges from 10% to 30% of the car's value.
- Monthly Payments: These are spread out over a period, often between 1 to 5 years.
- End of Agreement: Once all payments are made, the vehicle becomes yours to keep or sell.
Key considerations with Hire Purchase for those with IVAs:
- Your ability to meet the monthly payments will be scrutinized.
- The arrangement must be disclosed to your IVA supervisor to ensure it aligns with your debt repayment plan.
Option 2: Personal Contract Purchase (PCP)
Personal Contract Purchase or PCP, similar to HP, allows you to drive the car for a period while making payments towards an optional future purchase:
- Lower Monthly Payments: Because you're not paying off the entire car's value during the term.
- Final Balloon Payment: At the end, you can make this payment to own the car, return it, or use it as a deposit for another PCP deal.
🔔 Note: With an IVA, PCP might be more challenging to secure due to the potential for negative equity if the car is returned or repossessed.
Option 3: Guarantor Loans
If your IVA makes you a riskier prospect for lenders, a guarantor loan can provide a way forward:
- How it Works: A friend or family member guarantees the loan, promising to make payments if you default.
- Benefits: This can help you secure better rates and terms.
Option 4: Subprime Lenders
Subprime lenders specialize in lending to people with less-than-ideal credit:
- Higher Interest Rates: To compensate for the higher risk they take on.
- Smaller Loans: The loans might be smaller but are structured to fit into your financial capacity.
🔔 Note: While subprime loans offer a solution, remember that they come with a cost and can impact your long-term credit recovery.
Option 5: Specialist Brokers
Specialist brokers can be invaluable:
- Brokers for IVA Borrowers: They know which lenders are more open to customers with IVAs.
- Facilitating Loans: They work to find the best possible terms, often having relationships with lenders offering tailored products for those with IVAs.
To secure car finance while under an IVA, it's essential to be transparent with your debt management company or IVA supervisor. They can guide you to ensure the car finance does not compromise your IVA agreement. Lenders will look favorably upon this openness, recognizing your commitment to managing your finances responsibly.
In conclusion, while having an IVA might make obtaining car finance more challenging, it's not impossible. Options like Hire Purchase, PCP, guarantor loans, subprime lending, and working through specialist brokers can all serve as viable paths to securing a vehicle. The key is understanding the terms, assessing your repayment capability, and seeking advice to ensure you're making the right decision for your financial health. Keep your focus on long-term recovery, not just the immediate need for transportation, ensuring your IVA journey remains intact while addressing your mobility needs.
Can I get car finance if I’m still paying off my IVA?
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Yes, while it’s more complex, you can obtain car finance. Lenders might offer finance with higher interest rates or require a guarantor. Always inform your IVA supervisor before making such financial decisions.
Will my IVA affect the interest rates on my car finance?
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Likely, yes. Due to perceived higher risk, lenders might charge you a higher interest rate. This is where specialist brokers can be beneficial, often securing more favorable rates.
Do I need to inform my IVA supervisor if I’m considering car finance?
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Yes, it’s important to communicate with your IVA supervisor to ensure the car finance does not jeopardize your IVA arrangement. They can provide advice on how to proceed or potential modifications to your plan.
