Dealing with UK debt as an expat: everything you need to know

Moving to another country offers an opportunity for a clean slate, to start life over in a new home, new job, making new friends and connections, and building a fresh credit score. But if you had debt problems before you moved abroad, it’s important to know that jetting off to a faraway land does not mean that they’ll be forgotten about: in an ever-shrinking world, the chances are that your creditors will make an effort to trace you and collect what’s still owed. 

See also: Personal loans and debt for expats

Below, we’ve put together some tips on dealing with UK debt as an expat living abroad…

Protecting your citizenship

Perhaps one of the most important things to note is that your financial situation can have an impact on citizenship and visa applications - and indeed your right to remain there should your circumstances change post-move. When you apply to move to another country, you’ll be asked whether you used an insolvency process in the past - and information is publicly available online, so you must be transparent. Every territory has its own policies and rules on immigration and debt, so speak to a specialist if you’re concerned that your debts could have an effect on your residential status. As always, it’s best to be open and honest at all times.

Your credit rating 

It’s good to know that credit ratings don’t cross borders - they work on a national level rather than internationally, so if you had a poor credit score in the UK due to previous debts, you’ll be able to “start fresh” in your new country of residence and prove your credit-worthiness so you can apply for things such as car finance, mortgages, and loans in the future. As soon as you move to your new country, make sure that you’re working to build your credit score - make bill payments on time, reduce your debts, open more than one credit account, and try to avoid negative elements such as hard inquiries, bankruptcies, and delaying repayments.

See also: Securing a mortgage as an expat

Dealing with creditors

UK creditors can still take action to collect a debt, such as by using a debt collection agency in your new country of residence to contact you, taking court action in your home country, and taking court action in their country, such as in the UK, against assets and accounts you hold there. 

So, if you’re an expat living in the UAE but you still have a UK bank account and property, a debt collection agency could pursue those debts and potentially force you to sell assets in the UK. A credit can also bankrupt you in their home country, and it’s worth knowing that bankruptcy is recognised across borders in the European Union, and other territories have entered international agreements where services cooperate to share information. Therefore, it’s worth speaking to your creditor as soon as possible to discuss potential repayment plans.

Making repayments

If you’re in debt in the UK, the best way to deal with your current situation is to cover essential living costs and make repayments on unpaid debts, either at the full amount or at a reduced rate if you’re struggling to keep up with regular payments. Bear in mind that it can be more challenging to make debt repayments from abroad, as you’ll need to pay via IBAN transactions and they can incur fees from your bank. If possible, maintaining a UK bank account and repaying your debts from that account will reduce administrative duties and cut fees, but you’ll need to maintain a UK address and meet your bank’s requirements to do so.

Though it might be tempting to stop making debt repayments overseas, or perhaps even allow yourself to go bankrupt in your country of origin, it’s essential that you consider the possible consequences of doing so, and think about long-term financial goals. A creditor could still take action to recover money from you even if you were to go bankrupt, and you’ll permanently damage your credit score and reputation in the UK which could make securing future credit more difficult, should you decide to return on a temporary or permanent basis.

Getting support

The most important thing you can do if you’re struggling with debt as a UK expat is to seek professional advice from a UK financial adviser. It’s easy to bury your head in the sand and hope that your worries will go away, but tackling them head-on will ensure you address your current financial situation and deal with debts formally and in the correct manner. It might be challenging and emotional for you, but it’ll be worth it in the long-run when you’re debt-free.

Depending on how long you’ve been living out of the UK, you might be able to consolidate your UK debts in your new country of residence by taking out a new loan or credit card. It’s worth reviewing your options and considering the benefits and drawbacks of “relocating” your debt - on the plus side, it’ll make things easier to manage, but on the other hand, it will increase the amount of interest you owe and could have an impact on your foreign score.

The Money Saving Expat blog was created by expats, for expats, offering free, impartial advice. Click here to find out more and check back every week for new money-saving tips.