Imagine being offered your dream job in Europe and you need to report to your new office in a month. But before heading off, you need to get your affairs in order in South Africa.
What happens if you have outstanding debt? We find out, and consider the costs and benefits of settling the debt from your new home.
Tip: If you need to help with your debt, you can apply for debt consolidation.
Two ways of handling debt while abroad
According to Johann Rossouw, financial planner at Fiscal, a wealth management company, your debt will remain in place in your country of residence until it’s been settled.
If you move overseas and you decide to ignore your outstanding debt in South Africa, your creditor will take this as you defaulting on it and you will receive penalties for doing this.
This could include debt collector fees, which can be hefty. You will also be charged interest on the entire lumpsum that’s outstanding.
Therefore, it’s best to pursue one of two paths:
- Settle your debt before you leave the country
- Continue to pay your monthly instalments while you’re abroad
If you go through a formal emigration process, Rossouw cautions, only option one will be available to you.
READ MORE: If your creditors are hounding you, will you be charged collectors’ fees?
The benefits and costs of paying from abroad
If you don’t have the option to settle your debt before you leave the country, you will have to consider the implications of meeting your monthly payments while abroad.
“If you move to a country with a stronger currency, you can actually pay off your debt quicker than what you would have been able to in South Africa,” says Rossouw.
“However, it’s important to note that sending money back to South Africa will also incur certain costs. You need to try to keep this as low as possible,” he explains.
Rossouw advises making fewer but larger payments to settle your debt as quickly as possible in this instance.
Debt consolidation could help you settle your debt sooner rather than later.