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.

Whilst they provide a very useful way for those in debt to make things more manageable, they also come with some repercussions. One of these is that it is harder to obtain insurance at a competitive rate.

What’s the difference between an IVA and DRO?

Below is an explanation of IVAs and DROs –

  • 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 a IVA or DRO. Whilst 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 second 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. Whilst having poor credit might not cause insurance providers to turn you down, it will mean they’ll charge a higher rate for your policy.

Other factors that affect price

Below are some of the other factors that affect the cost of car insurance, other than your financial status –

  • Your age
  • Value of your vehicle
  • Any previous motoring or non-motoring convictions
  • Where your car is kept
  • What it’s used for
  • The level of cover required

Finding affordable car insurance when you have an IVA or DRO

If you need car insurance at a good price but feel that your financial status is going to affect this then you needn’t worry. There are specialist car insurance providers that deal with people who have financial difficulties on a more personalised basis. These insurance providers will not merely see you as a number and instead look at the exact nature of your financial situation and offer a quote that provides that cover you need and at a fair price.