Loans with an IVA: Is it Possible?

Updated: August 10, 2024 Author:

Quick Answer Getting a loan with an IVA is possible with a bad credit lender but you will need to check with your insolvency practitioner that you aren’t in breach of your IVA.

Loans for people with an IVA

Taking out a loan with an IVA isn’t the best option. However, if you need credit you’re probably wondering if it is possible to get a loan with an IVA. The short answer is yes, but there are some restrictions.

For loans or any other type of borrowing, you need permission from your insolvency practitioner to borrow more than £500. This rule also applies to borrowing from friends and family. During an IVA, you have to treat creditors fairly so you can’t prioritise paying back family and friends over other creditors.

Insolvency practitioners usually advise against taking out extra loans with an IVA. This is because the lenders that are most likely to lend to those on an IVA will charge high interest rates and you could face more difficulties in paying back the money and getting your finances on track. 

IVA early settlement loans are promoted by some lenders as a way to release you from your IVA early. An IVA typically lasts 5-6 years but early settlement loans come with high interest rates and you could end up paying back more money and for longer than you would on your IVA.

If you want to pay off your IVA early, discuss your options with your insolvency practitioner. 

Payday loans with an IVA

Taking out a payday loan with an IVA can lead to a spiral of debt. Many people find themselves on an IVA because of payday loans. With an IVA, interest is frozen and it’s often the high interest rates that catch people out with payday loans. 

Taking out another payday loan with an IVA isn’t impossible but you will need permission if it’s over £500. Many payday loan lenders aren’t as rigorous with their eligibility as high-street banks and will lend to people with an IVA.

Adding extra debt can affect your budget and you may find yourself struggling financially whilst you try to pay back the payday loan on time. 

Short-term loans with an IVA

Much like a payday loan, a short-term loan is possible with an IVA but you will probably need to speak to your insolvency practitioner first. Short-term loans are more likely to go over the £500 threshold for permission and speaking to your IP will ensure that you aren’t in breach of your IVA. You must be able to pay your new debt on top of your IVA.

Bad credit lenders including companies that lend to those with an IVA will charge high interest rates to protect their interests, meaning you’ll pay back a lot more than you borrow even with a short-term loan. 

The impact of an IVA also extends beyond its end date and you will be left with a low credit score making borrowing harder even after the IVA ends.

Car loans with an IVA

Getting a car loan with an IVA will likely only be possible through a bad credit lender. However, it’s not guaranteed as car loans tend to be quite large loans and you will need permission from your IP. If your insolvency practitioner decides that the loan isn’t necessary or that you can’t meet the repayments, then you shouldn’t take out a loan as you will breach your IVA. 

Even bad credit lenders can reject your car loan application if you prove to be too high risk.