If you have recently completed an Individual Voluntary Arrangement (IVA) and are considering purchasing a car, you may be wondering how long you will have to wait before you can obtain car finance.
An IVA is a legally binding agreement between you and your creditors to repay your debts over a specified period of time. While an IVA can have an impact on your credit score and financial standing, it is still possible to secure car finance.
In this article, we will explore the timeline for obtaining car finance after an IVA and provide you with useful insights to navigate this process successfully.
The impact of an IVA on your credit score
Before delving into the waiting period for car finance after an IVA, it’s important to understand how an IVA affects your credit score. During the IVA, your credit score will likely be negatively impacted as it reflects your inability to meet your financial obligations. The IVA will remain on your credit file for six years, starting from the date it was approved. However, as time goes on and you demonstrate good financial behaviour, its impact on your credit score will gradually diminish.
How long should I wait?
The waiting period to obtain car finance after an IVA can vary depending on several factors. Generally, it is advisable to wait for at least six months to a year after completing your IVA before applying for car finance. This time frame allows you to rebuild your credit history, demonstrate financial stability, and show lenders that you are capable of managing your finances responsibly.
Rebuilding your credit score
To improve your chances of obtaining car finance after an IVA, it’s crucial to focus on rebuilding your credit score. During the waiting period, take proactive steps to improve your creditworthiness. Pay all your bills on time, keep your credit utilisation low, and avoid taking on additional debt. Additionally, you may consider obtaining a secured credit card or a credit builder loan to demonstrate responsible credit behaviour.
Choosing the right lender
When applying for car finance after an IVA, it is important to choose the right lender. Traditional high-street banks and mainstream lenders may be less willing to offer finance to individuals with a history of IVAs. Instead, consider approaching specialist lenders or car finance companies that cater specifically to individuals with adverse credit histories. These lenders often have tailored options for those who have completed an IVA and can provide more flexibility in their lending criteria.
Providing adequate documentation
To strengthen your car finance application after an IVA, be prepared to provide thorough documentation. Lenders will likely require proof of your income, bank statements, and proof of address. Additionally, it may be beneficial to provide a written explanation of your IVA, emphasising the positive steps you have taken to rebuild your financial stability. By providing comprehensive documentation, you demonstrate your commitment and responsibility to potential lenders.
Seeking professional advice
Navigating the car finance application process after an IVA can be complex, and it is essential to seek professional advice. Consider consulting with a financial advisor or credit specialist who can guide you through the process, assess your financial situation, and provide personalised recommendations. Their expertise can help you make informed decisions and increase your chances of obtaining car finance on favourable terms.
While an IVA can have a temporary impact on your credit score, it does not mean you cannot secure car finance. By waiting for an appropriate period, rebuilding your credit score, choosing the right lender, providing adequate documentation, and seeking professional advice, you can increase your chances of obtaining car finance after an IVA. Remember to be patient, diligent, and proactive in managing your finances, as this will greatly contribute to your financial recovery and future success.