For most of us, taking on a certain level of debt is simply a part of life. Whether it’s credit card debt or a mortgage, most people will borrow money and need to pay it back at some stage.
The quicker you pay the money back the better off you’ll be, but debt can become even more complex when you move abroad to Australia. Let’s take a look at how overseas debt works and how you can pay your creditors as quickly and easily as possible.
Compare international money transfers to pay off your overseas debt
Common overseas debts
It’s not unusual for people to owe money back home when moving overseas. Below are some of the most common debts Australian people have include:
- Credit card debt
- Student loans and education fees
- Car loans
- Personal loans
- Home loans
- Tax debt
Whether it's for your career, romance or even a simple desire for adventure, you can still do so even if you are in debt.
Finder survey: How do Australians from different states prefer to send a money transfer?
| I do not transfer money | 45.05% | 31.85% | 43.21% | 41.82% | 34.54% |
| App | 26.13% | 29.11% | 28.4% | 25.91% | 29.81% |
| Website | 15.32% | 20.89% | 12.35% | 19.09% | 20.33% |
| In person | 9.91% | 14.04% | 14.81% | 10.45% | 11.98% |
| Over the phone | 2.7% | 3.42% | 1.23% | 1.36% | 2.23% |
| Other | 0.9% | 0.68% | | 1.36% | 1.11% |
Source: Finder survey by Pure Profile of 1110 Australians, December 2023
Data for ACT, NT, TAS not shown due to insufficient sample size. Some other states may also be excluded for this reason.
Can I leave my debts behind?
In many cases, your debt won’t stop you leaving your home country and heading to Australia, but that doesn’t mean you’ll be able to leave those old debts behind and start life Down Under with a clean slate. Of course, what will happen to your debt (and to you) will vary depending on a 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.
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.
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 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. For example, if you’re a US expat who works in Australia for an American company, that company is subject to US laws and may be required to dock your wages to pay off your debts.
Your creditors could catch up with you in Australia
There are plenty of other ways your creditors might seek to reclaim the money they are owed. For example, the ATO has agreements in place with tax and revenue services in many other countries around the world to force debtors to pay their bills. Banks or credit card providers may also 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 have to do to get your finances back on track. The best approach is to get on the front foot and work out a reasonable agreement to pay back the money you owe. By showing that you are willing to work to pay off your debt as quickly as possible, you will 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.
How to pay off an overseas debt
The hard part of paying off an overseas debt is saving enough money to repay what you owe; the act of sending money overseas to your creditors is actually quite easy.
To get the necessary funds back to your home country you will need to send an international money transfer. There are 3 main ways to do this:
Through your bank
You can send the money from your Australian bank account to an account in your home country. This is usually the most convenient option (because you will 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 Australia to hundreds of thousands of agent locations around the world. This is a good option 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, specialise in sending international money transfers. They tend to offer the best exchange rates and lowest transfer fees.
If you're looking for the cheapest way to transfer money overseas, online money transfer specialists will usually win out. However, you’ll need to compare international money transfer providers to find the best exchange rates and lowest transfer fees.
Debbie moved to Australia from the UK in mid-2019, leaving behind a £1,500 personal loan debt. After a couple of months working in Australia and getting her finances in order, Debbie has saved enough money to pay off the amount she owes. She initially plans to send the funds straight from her account with a major Australian bank back to her old bank account, but she decides to compare her options and see if a money transfer company can offer a better deal.
The results of her comparison are shown in the table below. As you can see, Debbie can save $138.30 if she sends the transfer via an online money transfer company rather than from her bank. This shows just how important it is to shop around for the best exchange rate and lowest transfer fees.
* This is a fictional, but realistic, example.
| Bank | Online money transfer provider |
|---|
| Exchange rate | 1 AUD = 0.5599 GBP | 1 AUD = 0.5935 GBP |
| AUD needed to convert to £1,500 | $2,680 | $2,546 |
| Transfer fee | $22 | $17.70 |
| Total cost of transfer | $2,702 | $2,563.70 |
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 Australia. This will give you a destination for your international money transfer and then allow you to manage debt payments via Internet banking.
Try to pay off debt before leaving
No matter which money transfer provider you choose, paying off overseas debts will still lead to additional expenses due to exchange rates and transfer fees, not to mention the added pressure of interest charges. With this in mind, take whatever steps you can 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.
