Frozen Interest, Question by Question
When the freeze starts, what it covers, and why it matters so much.
Will interest and charges stop during an IVA?
Yes. Once your IVA is approved, the interest, fees and charges on the debts it includes are frozen for the entire length of the arrangement. This is one of the main benefits of an IVA: instead of your balances creeping up month after month, they are held still, and your fixed monthly payment goes towards reducing what you actually owe.
When exactly does the interest freeze?
From the moment your IVA is approved by your creditors. That is the point at which they become bound by the terms and must stop adding interest and charges. While your proposal is still being prepared and considered, interest can in principle still build up, so the sooner the IVA is approved, the sooner the freeze takes effect.
Does it apply to all my debts?
Only to the debts inside the IVA. Every unsecured debt included in the arrangement has its interest and charges frozen. Debts that sit outside the IVA, such as a mortgage, a secured loan or a student loan, are not covered and carry on charging interest as normal, which is why you keep paying those separately.
Does the interest ever start again?
Not while you keep to the arrangement. As long as your IVA is running and you meet its terms, the interest stays frozen right through to the end. The exception is if the IVA fails: if it is cancelled or breaks down, the freeze ends and creditors can add back interest and charges, sometimes for the whole period, which is one reason keeping the IVA on track matters so much.
What about charges and late fees?
They stop too. It is not just interest, the freeze covers the late payment fees, default charges and other costs that creditors might otherwise pile on. Once the IVA is approved, none of these can be added to the included debts. For people whose balances were being eaten up by charges, this can make a dramatic difference.
Will my balance go down during the IVA?
Yes, steadily. Because the interest is frozen, every payment you make reduces the balance rather than just covering new charges. Over the term, your included debts come down, and whatever is left at the end is written off. This is the difference between an IVA and simply struggling on, where interest can keep you running to stand still.
Is frozen interest unique to an IVA?
No, but it is guaranteed in one. In an informal arrangement like a Debt Management Plan, creditors may freeze interest as a goodwill gesture, but they do not have to, and some keep charging it. In an IVA, the freeze is part of a binding, approved agreement, so it is certain rather than hoped for. That certainty is a big part of an IVA's appeal.
Should I get advice?
Yes. Freezing interest is a real benefit, but it is only one factor in whether an IVA is right for you. A free, impartial adviser can weigh it up alongside everything else and tell you honestly whether an IVA, a Debt Management Plan or another route would serve you best. It costs nothing and there is no obligation.
