With so many people in the UK being in debt, Individual Voluntary Arrangements and Debt Relief Orders are starting to become the norm. Creditors are typically very aggressive when it comes to recouping the money they’re owed and if you find that you’re unable to make payments then getting an IVA or DRO is often the best option.
While they provide a very useful way for people in debt to manage their finances more easily, they also come with their own problems – one being the impact on finding car insurance at a competitive rate.
What’s the difference between an IVA and DRO?
- Debt Relief Order – A Debt Relief Order is a way to have your debts written off completely. To be eligible you must owe no more than £15,000 in total and also be able to prove that you have very few valuable assets
- Individual Voluntary Arrangement – With an Individual Voluntary Arrangement you will still pay your creditors but any additional charges or interest cannot be applied for the length of the IVA. Also, you will only have to pay what you can afford each month, after reasonable living expenses have been accounted for
Why do IVAs and DROs affect the price of car insurance?
IVAs and DROs will affect the price you can expect to pay for car insurance for two main reasons. Firstly, insurance providers will consider you a higher risk when you have an IVA or DRO. While you might not be any more likely to make a claim, you will be considered more likely to miss payments and therefore your premium will be higher.
The other reason is that both DROs and IVAs affect your credit rating. Just like any other company who you arrange monthly payments with, most insurance providers will do a credit check to see if you’re eligible. While having poor credit might not cause insurance providers to turn you down, it will mean they’ll charge a higher rate for your policy.
Finding affordable car insurance when you have an IVA or DRO
If you’re worried your financial status is going to affect the price of your car insurance, look no further. There are specialist car insurance providers that deal with people who have financial difficulties on a more personalised basis. These insurance providers will consider the exact nature of your financial situation and offer a quote that provides the cover that’s right for you, at a fair price.