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How to pay off an overseas debt
Don't let your debt follow you around the world.
Your debt doesn’t just disappear when you cross an ocean. So if you’re ready to live life in another country, you may need to jump through a few extra hoops to get your finances in order first.
How to pay off an overseas debt
Sending money overseas to your creditors is actually quite easy.
To get the necessary funds back to your home country you’ll need to send an international money transfer. There are three main ways to do this:
Through your bank
Send the money from your foreign bank account to an account in your home country. This is usually the most convenient option (because you’ll already have an account set up and ready to go) but in many cases will also be the most expensive.
Through a cash transfer provider
Companies such as Western Union and MoneyGram offer fast cash transfers from the US to hundreds of thousands of agent locations around the world. These are good options if cash is an accepted form of payment and if you need to pay off your debt as quickly as possible.
Through an online transfer provider
These companies, such as OFX and Wise, specialize in sending international money transfers. They tend to offer the best exchange rates and lowest transfer fees.
If you want to find the most cost-effective way to transfer money overseas, specialist online transfer companies will usually win out. However, you’ll need to compare international money transfer providers to find the best exchange rates and lowest transfer fees.
How to choose a money transfer provider
There are several factors you need to consider when choosing a company to handle your international money transfer, including:
- Exchange rate. A minor difference in the exchange rate can make a huge difference to the affordability of your transaction. Shop around for a company that always offers the best exchange rates, but make sure those great rates don’t come with high transfer fees attached.
- Transfer fee. Compare the fee that each provider charges per transfer. Fees could be as high as $60 or $70, depending on the amount you send and where you are sending it, or as low as a few dollars. Some providers will also waive their fees on large transfers.
- Transfer options. Can you send your transfer online, over the phone and/or by visiting a branch? Is there a smartphone transfer app?
- Transfer methods. If you need to make regular repayments to your creditors, check to see whether the transfer provider allows you to set up a recurring payment schedule. Other transfer options, such as forward contracts and limit orders, can also be used to help you save time and money.
- Processing time. Compare how long it will take each provider to complete your transfer. Some companies, such as Western Union, offer cash transfers that are completed within minutes, while other transfer options can take as long as five days.
- Available currencies. Hopefully you will only have overseas debt to be repaid in one country, but if you owe money in multiple countries then you will need to make sure that your transfer provider offers support for all the relevant currencies.
- Customer support. If you ever have a problem with a transfer or need help, will you be able to access the assistance you need over the phone, via email or through a live chat service?
Common overseas debts
Because debt is such a widespread part of life for many, it’s not unusual for people to owe money when they plan to move overseas. Some of the most common outstanding debts you might be facing include:
- Credit card debt
- Student loans and education fees
- Car loans
- Personal loans
- Home loans
- Tax debt
But despite the fact that you still owe money, sometimes life changes and you decide you want to move abroad. Whether it’s your career, romance or even a simple desire for adventure that prompts you to move to Australia, you can still do so even if you are in debt.
Can I leave my debts behind?
In many cases, your debt won’t stop you from leaving your home country and heading somewhere else, but that doesn’t mean you’ll be able to leave those old debts behind and start over with a clean slate. Of course, what happens to your debt will vary depending on a wide range of factors, including the amount you owe, who you owe it to and the laws in your home country surrounding debt repayment.
There are several potential outcomes, including:
- Arrest. If you owe money to the government in your home country, you could be arrested at the airport before you even depart. Alternatively, you may be refused permission to head overseas and have your passport seized.
- Your credit history will suffer. If you try to skip out on your debt or fail to make repayments on time, your credit file will take a battering. This could have devastating consequences in the future if you ever plan to return to your country of origin. Your credit history could also catch up with you overseas — it all depends on whether any lender you approach for financing asks for details on your credit history in your home country.
- You may face legal action. Your creditors may take legal action against you to recover their debts, and this action may continue regardless of whether or not you’re in the country and able to attend court. While an overseas court may not be able to force you to pay your debt from overseas, it could allow creditors to go after whatever assets you still have in your home country.
- You could lose some of your salary. If you work overseas for a company based in your home country, your pay could be garnished or withheld.
- Your creditors could catch up with you. Banks or credit card providers may send debt collectors after you in your new country of residence to try to reclaim their debt.
How to deal with overseas debt collectors
Dealing with debt collectors can be a worrying and intimidating experience for many, but it’s something you may have to do if you want to get your finances back on track. The best approach is to be proactive and work out a reasonable and affordable agreement to help you pay back the money you owe.
By showing that you are willing to work to pay off your debt as quickly as possible, you’ll take some of the sting out of the situation. It’s also important to remember that you have rights when dealing with debt collectors to ensure that you are not harassed, intimidated or treated unfairly
Top tips for paying off an overseas debt
- Keep an overseas bank account open. Consider keeping your existing bank account open when you move to another country. This will give you a destination for your international money transfer and then allow you to manage debt payments online.
- Try to pay off debt before you leave. Paying off debts from overseas leads to additional expenses due to exchange rates and transfer fees, plus the longer you wait, the more interest you’ll pay. Try to pay the debt off before you leave your home country — for example, could you use the proceeds from the sale of your house, furniture or car?
- Debt collection agencies aren’t limited to one country. Moving overseas won’t help you escape your debt. Many debt collection agencies operate internationally, while other agencies can “outsource” your debt to other collectors.
Bottom line
Managing debt while you’re overseas is a little more complicated, but it’s not insurmountable. If you need to transfer money to creditors internationally, do your research to find the most competitive exchange rates and the lowest fees — and then relax knowing that even if it’ll take a while to pay your debt down, you’ve got it under control.
Frequently asked questions
What are the details on paying my creditor with a credit card?
We don’t recommend it. If you have an active credit card in your home country, you can use that to pay your creditors as long as they accept credit cards. However, you’ll still need to pay off your credit card, which leaves you right back where you started.
If you have a US credit card that you can easily pay off from your bank account, you may be able to use it to pay your overseas creditors, but it’s likely to come with an unfavorable exchange rate.
How will my credit score affect me abroad?
It depends. Every country has their own unique credit scoring system. However, your current credit file will remain in your home country if you ever return.
When can a creditor take money out of my savings account?
Laws concerning debt vary wildly by country. To find out if your overseas creditor can take money out of your savings account in your home country, you’ll need to look up your country’s laws.
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