Car finance after a Debt Repayment Order (formerly Summary Instalment Order)

Check the name before you search

If your paperwork says “Summary Instalment Order” or “SIO”, you are in the right place, but the name has changed. The Insolvency and Trustee Service explains that amendments to the Insolvency Act 2006 renamed the Summary Instalment Order as the Debt Repayment Order, and raised the cap on unsecured debt to $50,000. Its current page uses “Debt Repayment Order” (DRO) and does not mention the old name.

That matters for two reasons. First, if you search with the old name you will find old advice, some of it out of date. Second, when you talk to a lender, use the current name and your completion date, and keep your original order to hand in case they ask.

Fair Finance is a referral service, not a lender. This page is for someone who has completed a DRO or SIO. If you are still making payments under one, you have extra obligations covered below, and we cannot refer you yet.

What a DRO is, and what it is not

A DRO is a way to repay unsecured debt over a set period under a plan, without going bankrupt. According to the Insolvency and Trustee Service and Consumer Protection:

• You must owe less than $50,000 in unsecured debt and be able to make some repayments.
• It usually lasts about three years, though it can be more or less.
• You keep control of your assets, income and spending.
• Your DRO creditors must agree to the plan.
• You appoint a DRO Supervisor, who sends notices to creditors, checks claims and makes sure payments are correct.
• When the DRO is complete, you do not have to pay anything further toward the amount owed to DRO creditors.
• Child support, student loans, court fines and reparation are not wiped, and debts not included in the DRO can still be pursued.

Secured debts such as a car loan are paid separately. If you had a car loan during the DRO, that was between you and that lender.

What it leaves behind

A DRO is not a bankruptcy, so it does not go on the Insolvency Register. It does leave two kinds of trace.

• The DRO Register. Accepted DROs are listed on a public register while they are running. The Insolvency and Trustee Service says that once the DRO is finished, the record is removed from that register.
• Your credit file. This is the one that matters for a car loan. Credit reporting agencies may hold details for up to five years, which can run past the end of the order. The Insolvency and Trustee Service notes that a DRO file should show how much you repaid creditors.

The five-year figure is a maximum, not a promise. The only way to know your own position is to read your reports from Centrix, Equifax and Experian (formerly illion). For the checking steps see our page on bankruptcy and your credit file, which covers the same bureaus.

How lenders tend to read a completed DRO

Lenders vary, and none publishes a rule. In general terms, a finished DRO tells a lender two things at once. It tells them you ran into trouble. It also tells them you then repaid under a supervised plan for a period of years. Some lenders take the second point seriously.

What usually weighs on the decision:

1. Time since you finished. More months of clean history since completion mean more to look at.
2. Whether you finished or it was cancelled. A plan completed in full reads differently from one that ended early.
3. Your income now, and whether it covers a repayment after your usual costs.
4. Anything since. New defaults, missed rent or phone payments count more than the old order.
5. The loan. A smaller loan on a modest car is easier to support than a large one.

Under the Credit Contracts and Consumer Finance Act, lenders must check the loan is affordable for you. A DRO does not change that, it just adds context. See our CCCFA glossary entry.

If you are still under the order

Do not take on a car loan without thinking it through. While a DRO is in force, you must not take on new debt over $1,000 without telling the new creditor you are in a DRO, and the Insolvency and Trustee Service advises doing so in writing. Talk to your DRO Supervisor first, because a new repayment can affect the plan you have already agreed.

Steps to take once it has finished

1. Get your completion confirmation from the Supervisor or the Insolvency and Trustee Service and keep it with your records.
2. Order your credit reports from all three bureaus and check the DRO is shown as completed with the amounts repaid.
3. Ask for corrections if anything looks wrong. A bureau must decide as soon as it can.
4. Build a short record. Rent, power and phone paid on time. If you can, a small amount saved each week.
5. Work out what you can afford, using the repayment calculator and our guide to what a car really costs.
6. Apply once, carefully. Use a referral service or a lender you have chosen, not a scatter of applications. See how applying affects your credit.

Example: a loan sized for a finished DRO (illustrative only)

Round, made-up numbers to show the maths, not a quote. Suppose your DRO finished nine months ago, you earn steady wages and you want a $10,000 car with a $1,500 deposit. You would borrow $8,500. At an example rate of 21.95% over 48 months:

• Repayments are roughly $268 a month.
• The total repaid is about $12,850, of which about $4,350 is interest.

At 36 months the repayment rises to roughly $325, but the total interest falls to around $3,200. If the longer term is the only way to afford the repayment, a smaller car may be the better answer. Real rates differ by lender and situation.

Common mistakes

• Searching only for “SIO” advice. Out-of-date pages may state the wrong debt limits and terms.
• Assuming the order is gone from your file. It may be there for up to five years.
• Forgetting debts that were never in the order. Child support, fines and student loans still count toward your commitments.
• Skipping the PPSR check on a used car. See our guide to PPSR checks.
• Taking the first offer. Compare the total cost of credit, not only the weekly figure.

Free help

MoneyTalks (0800 345 123) offers free budgeting help, and Good Shepherd Good Loans provides no-interest loans for essentials such as a car, with eligibility criteria. Check each website for who qualifies.

If you also owe Inland Revenue

Tax debt is handled differently from the debts in a repayment plan. Inland Revenue offers its own instalment arrangements, which split a tax debt into weekly or fortnightly payments, and it says your tax obligations change if you become bankrupt or insolvent. Do not assume an arrangement with Inland Revenue is part of your Debt Repayment Order, or that it is finished when the order is. Ask the Insolvency and Trustee Service which of your debts the order covers, and check your Inland Revenue account before you apply for finance, because an open tax arrangement is part of the commitments a lender will weigh.

How Fair Finance helps

You give your details once, we run one soft credit check that does not affect your score, and we refer you to panel lenders who consider applicants with a past insolvency procedure. A hard check happens later and only if you choose a lender. Start with the eligibility check, or read how it works.

General information only, not financial or legal advice. Insolvency rules and retention periods can change.

Sources

• Insolvency and Trustee Service: Debt Repayment Orders
• Insolvency and Trustee Service: Amendments to the Insolvency Act 2006
• Insolvency and Trustee Service: How insolvency affects you
• Insolvency and Trustee Service: Life after insolvency
• Consumer Protection: Bankruptcy and insolvency
• Good Shepherd NZ: Good Loans
• MoneyTalks
• Inland Revenue: Debt and insolvency