How to effectively manage overseas debt

Bessie Hassan | Money Expert at

Most of us have had to take on some form of personal debt throughout our lives.

Whether it’s plastic debt, a student loan or taxes, it’s likely you’ve clocked up some debt over the years. However, if you decide to move overseas, you don’t leave this debt behind in your home country. You take it with you. 

If you don’t pay up you could face repercussions. Your credit history could take a hit, you may face legal action or you may forgo some of your salary if the company is forced to use your wages to service the debt. 

While servicing an overseas debt may seem challenging, it doesn’t have to be. To help you manage your financial obligations both before you leave and once you’ve touched down in your new country of residence, here are some things to keep in mind:

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Try To Service Your Debt Before You Leave

One way to minimise your financial obligations is to repay as much of your personal debt as possible while you’re still on home soil. Servicing your debt as soon as possible will help you reduce the amount of interest you’ll have to pay on the loan and it will also relieve you from additional financial pressure once you reach your new destination.
Whether it’s your credit card, mortgage or car loan, get a headstart on your debt by making regular extra repayments on top of the minimum repayment amount. Obviously, you can do this before you leave as well as during your time overseas.
For example, if you had a $300,000 mortgage with 5.12% interest and you made an extra repayment of $250 a month starting from your fifth year, you’d save over $55,000. Plus, you’d shorten your loan term by five years and nine months.

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Think About Consolidating

You may need to make some changes to your financial behaviour in order to service your debt more efficiently, and one way you can do this is through debt consolidation.
For instance, if you have several credit cards, you may want to use a 0% interest balance transfer credit card to roll all your credit card balances into one. This type of card offers an interest-free period, which can help you pay off your debt faster and you’ll save on interest.
Alternatively, you may want to chip away at your debt by consolidating other debt such as your mortgage or personal loans. However, just be careful about combining short-term and long-term debt.

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Notify The Authorities

It’s a good idea to let the authorities know about your plans to move overseas. Whether it’s notifying your bank or registering your plans via a government website, be proactive and advise  the authorities of your travel plans to avoid confusion down the track.
For instance, in Australia, if you have a Higher Education Loan Programme (HELP) debt, from July 2017 onwards, you’ll still be required to make compulsory repayments towards your loan even if you’re overseas. Changes to the HELP repayment obligations, effective 1 July 2017, mean that you’ll need to update your details via the myGov website if you’re planning on living abroad for more than 12 months. You’ll also need to lodge your worldwide income.
Similarly, it’s important that your bank is aware of your plans to move overseas to avoid them unexpectedly closing your account due to “suspicious” activity abroad. Again, this will ensure that there’s only smooth sailing once you head overseas.

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Evaluate Your Ongoing Obligations

Finding out exactly what you owe and to who is another good way of alleviating some pressure (both emotional and financial) before you head overseas. If you have a student loan, get in touch with a government or tax authority to see exactly how much you owe and to review your payment plan.
If you still have an outstanding balance on your mortgage and you’re struggling to meet your repayments, contact your bank to see if they can give you a repayment holiday or if they can offer you a lower interest rate.
Giving your debts a bit of a “spring clean” gives you the chance to review your expenses to see if you need to make any changes to your payment plans and to potentially negotiate a better financial deal

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Use a Global Money Transfer

Once you’re settled in and you’re well and truly enjoying the expat life, you’ll quickly find that sending funds back home via an OFX money transfer is a cost-effective solution. OFX offers the option of setting up recurring transfers, which are suitable for ongoing payments such as your home loan or school fees. This can come in handy when you’re managing several debts.
Additionally, OFX offers favourable exchange rates (compared to the bank) that could lead to big cost savings if you have regular repayment commitments. Being regulated by the Australian Securities and Investments Commission (ASIC), and with a 24/7 global team of experts and a range of options including spot payments, you know your money is in safe hands with OFX.

Jumping on a plane and heading abroad is exciting, but it doesn’t mean that you can leave your debts behind. Preparing yourself before you leave and knowing how to manage recurring payments while you’re overseas is important to ensure that you remain in control of your personal finances wherever you are in the world.

IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.