Ever looked at your monthly budget and wondered whether you would pay your credit card bills, your student loan or any other debts? A study conducted by Nerdwallet shows that an average of US households owes $137,063 in debts. This raises a question to travelers who would like to know their financial future when they travel abroad while in debt.
Your debts will not be forgotten when your travel abroad. In fact, the interest rate may even accumulate and create a large amount which might be hard for you to settle in the future. A debt that you leave behind may also affect the credit score you have. However, there are several ways to settle your debts and avoid the repercussions. Keep reading to know more.
What Should People Know When Travelling Away From Debts?
Some people move out of their country to escape from debts. They think that being out of the county will probably lessen the debt weight or remove the stress associated with the obligations. However, it is a bad idea. You shouldn’t consider this an option due to the following four reasons:
1. Debt Companies Can Go International
If you travel abroad while in debt, it doesn’t mean the lender won’t chase you. At times, the companies of the state you move in to can buy the debt amount and then chase you. Additionally, the same lender may have branches or agents in the same country you move in to.
2. It Taints Your Credit Record
Running away from your country because of debts will only leave a bad mark against your name in the credit records for a long time. If you ever return to your state, the chances are high that you will still be chased for the amount and above all, have a bad credit history which might prevent you from getting other loans.
3. You Can be Trapped Abroad
No one knows what might happen next, and tomorrow might get worse in that new country when things don’t work out well. There are many reasons, you might even become homesick and desperately miss your home country. Wait a minute; you have multiple debts which you didn’t settle when you were leaving. What do you do now?
That will be a harsh welcome which might even cost you more than you should have before. You will put yourself in a tight financial situation or even deal with a financial crisis.
4. For The Sake of Your Conscience
No matter how appealing running away from your country to escape debts might look, just don’t do it. Although it might make you feel better at first, you will never be settled as your conscience won’t be clear enough. You will also be leaving in fear that something might happen to your property. So deal with it, and move away when you have cleared your debts.
How To Prevent Problems When You Travel Abroad While in Debt?
If you must travel and leave behind outstanding debts, then be sure to continue making your payments. You have these three options for making international debts payments:
1. Keep Your Bank Account When You Leave the Country
This is the best option that can help you to settle your debts irrespective of your current location. If you always settle your debts by using your bank account, then keep your bank account number well as you can continue making cash deposits when you are away. By doing this, you won’t have to keep notifying the company that you have paid.
2. Use Someone Elses Account
This is an alternative option for those who don’t want to keep their bank accounts. Find a family member or trusted friend and use their accounts to manage your payments. However, you should only use this method if you trust the person.
3. Start Direct Debits Using a New Bank Account
You can open a new bank account from the other country and then start making the payments using that account. However, you should notify your lender first before making this move, so that they can advise on whether they are comfortable with the arrangement or not.
It’s advisable to always inform your lender if you’re going to travel abroad while in debt. This will help the bank to know that you are not escaping from the debt. Also, your lenders will tell you the best method that they would like you to use to settle the indebtedness while abroad.
How to Settle Your Debts Before You Leave?
Your lender might advise you to settle to debt before you leave. In that situation, you can:
- Use your cash to pay the amount,
- Look for trusted people who can help you to clear the debts,
- Sell your property such as house or goods,
- Obtain a credit from your new country and use it to settle the debt.
Don’t forget about your financial situation when you travel abroad while in debt. If possible, start a side hustle to help you manage the debt. Also, be responsible and avoid getting into other debts before you clear the earlier ones.
1. Tamara E. Holmes (2010). What Happens to Unpaid Credit Card Debt If You Move Abroad? СreditСards.com. Available at https://www.creditcards.com/credit-card-news/does-debt-follow-you-overseas-1267.php
2. Can My Creditors Chase Me for Payment in Other Countries? BuddyLoans.com. Available at https://www.buddyloans.com/guide-on-travelling-while-in-debt/can-creditors-chase-me-abroad
3. Emilie Burke (2018). Can Credit Card Debt Follow Me Overseas? MoneyManagement.org. Available at https://www.moneymanagement.org/blog/2018/02/can-credit-card-debt-follow-me-overseas
4. Alison Steed (2016). Heading Abroad to Escape Your Debts? Think Again Telegraph.co.uk. Available at https://www.telegraph.co.uk/expat/expatnews/11154995/Heading-abroad-to-escape-your-debts-Think-again.html
5. Sally Herigstad and Karen Haywood Queen. 8 Myths about Settling Credit Card Debt. CreditCards.Com,LLC. Available at https://www.creditcards.com/credit-card-news/help/8-myths-settling-credit-card-debt-6000.php
6. State of Connecticut, Department of Banking. ABC’s of Banking. Portal.Ct.Gov. Available at https://portal.ct.gov/DOB/Consumer/Consumer-Education/ABCs-of-Banking—What-is-a-Foreign-Bank
7. What Assets Can Be Seized by a Judgment Creditor. Assetprotectionplanners.Com. Available at https://www.assetprotectionplanners.com/strategies/assets-seized-judgment-creditor/
8. Correspondent Bank. Investopedia.Com. Available at https://www.investopedia.com/terms/c/correspondent-bank.asp
9. Bad Credit History and Rating. Experian Information Solutions, Inc. Available at https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/bad-credit-history-and-rating/
10. International Banking. Fdic.Gov. Available at https://www.fdic.gov/regulations/safety/manual/section11-1.pdf