Help me repay my debt from abroad
May 12, 2010 4:34 AM Subscribe
Help me repay my debts from abroad: My considerable student loans are in CDN, but I am earning in EUR - can/should I move my debt?
I have student loans that will take me, I believe, anywhere between 5 and 10 years to pay off. They are in the form of a line of credit in Canada. I live and work in Europe, and am earning euros. Moving money from here to there is nerve-wracking, as the exchange rate is constantly fluctuating (currently rapidly out of my favour).
So the questions I have are
1) Is it possible to move my debt to a European institution?
2) Is that even a good idea? I might move back to Canada. Or to England. And maybe I move the debt at one rate, only to discover I would have spent less euro to repay it if I kept in Canada.
3) Do you have some other recommendation on the best approach to paying off a debt a in a foreign currency?
I currently use XE trade to move money, as it has better rates than the banks, and no fees. You rinput is appreciated!
I have student loans that will take me, I believe, anywhere between 5 and 10 years to pay off. They are in the form of a line of credit in Canada. I live and work in Europe, and am earning euros. Moving money from here to there is nerve-wracking, as the exchange rate is constantly fluctuating (currently rapidly out of my favour).
So the questions I have are
1) Is it possible to move my debt to a European institution?
2) Is that even a good idea? I might move back to Canada. Or to England. And maybe I move the debt at one rate, only to discover I would have spent less euro to repay it if I kept in Canada.
3) Do you have some other recommendation on the best approach to paying off a debt a in a foreign currency?
I currently use XE trade to move money, as it has better rates than the banks, and no fees. You rinput is appreciated!
Response by poster: Good point - prime interest in Germany is 1%, whereas it is 2.25% in Canada. So there could be big savings there.
Maybe this would be best answered by walking into my current bank and asking them my options.
posted by molecicco at 5:04 AM on May 12, 2010
Maybe this would be best answered by walking into my current bank and asking them my options.
posted by molecicco at 5:04 AM on May 12, 2010
I did this last August (except I live in the UK, so I deal in £ rather than €).
Quick answers:
1) Absolutely possible, so long as you can get a loan from the European institution. Then just do a wire transfer back to Canada and be patient; you may need to call your bank at home to get the SWIFT code for you account (I had to do so with TD). Given the likely size of the transfer, get the bank to do it for you; that way you can make non-receipt (if it happens) their problem.
2) Yeah, that's a hard question. Pondering the same thing meant that I delayed 5 years before I finally did it. Now that I've done it I feel much better. So, yes, I would say that it is a good idea.
3) Not really.
Longer context:
My wife and I moved to the UK a bit more than 6 years ago, expecting to only be here for a year. Fine, we thought, tie up the Canadian finances so they can run on autopilot for a bit more than a year, and pick up once we get home.
Towards the end of the year I got a job offer for a further 3 years (while I did a PhD); we scratched our heads, looked at finances, and stayed. We thought that it would be best to leave the debt in Canada as, surely, we'd be going home in 3 years, right? Naturally, since finishing the PhD two years ago other things have happened that mean we're still in the UK, and not too likely to manage to move back to Canada soon.
We finally bit the bullet and moved the debt we had in the lines of credit over here. From the perspective of control, it was a very good decision. We have a regular payment that we don't need to worry about missing because of the long delay involved in wire transfers. If a miracle happens and we win a lottery, we can pay it off immediately; conversely, if shit happens, we can refinance without extra difficulties.
Good luck!
posted by joeycoleman at 5:55 AM on May 12, 2010
Quick answers:
1) Absolutely possible, so long as you can get a loan from the European institution. Then just do a wire transfer back to Canada and be patient; you may need to call your bank at home to get the SWIFT code for you account (I had to do so with TD). Given the likely size of the transfer, get the bank to do it for you; that way you can make non-receipt (if it happens) their problem.
2) Yeah, that's a hard question. Pondering the same thing meant that I delayed 5 years before I finally did it. Now that I've done it I feel much better. So, yes, I would say that it is a good idea.
3) Not really.
Longer context:
My wife and I moved to the UK a bit more than 6 years ago, expecting to only be here for a year. Fine, we thought, tie up the Canadian finances so they can run on autopilot for a bit more than a year, and pick up once we get home.
Towards the end of the year I got a job offer for a further 3 years (while I did a PhD); we scratched our heads, looked at finances, and stayed. We thought that it would be best to leave the debt in Canada as, surely, we'd be going home in 3 years, right? Naturally, since finishing the PhD two years ago other things have happened that mean we're still in the UK, and not too likely to manage to move back to Canada soon.
We finally bit the bullet and moved the debt we had in the lines of credit over here. From the perspective of control, it was a very good decision. We have a regular payment that we don't need to worry about missing because of the long delay involved in wire transfers. If a miracle happens and we win a lottery, we can pay it off immediately; conversely, if shit happens, we can refinance without extra difficulties.
Good luck!
posted by joeycoleman at 5:55 AM on May 12, 2010
I paid off my (US) student loans by taking out a personal loan here (UK) and doing the bank transfer.
I'm really regretting not doing it earlier, because the rigmarole I went through was such a bitch compared to how easy the solution was.
If you're staying in the EU-zone for a period of time that more-or-less matches up how quickly you can pay off the loan, then, god, do it. It's so much easier.
Of course, if you move to another country, you could just do the same thing again, but this time Euros > New Currency. It's a bit of a gamble with the exchange rates, but it beats dealing with student loan companies every month.
posted by Katemonkey at 6:18 AM on May 12, 2010
I'm really regretting not doing it earlier, because the rigmarole I went through was such a bitch compared to how easy the solution was.
If you're staying in the EU-zone for a period of time that more-or-less matches up how quickly you can pay off the loan, then, god, do it. It's so much easier.
Of course, if you move to another country, you could just do the same thing again, but this time Euros > New Currency. It's a bit of a gamble with the exchange rates, but it beats dealing with student loan companies every month.
posted by Katemonkey at 6:18 AM on May 12, 2010
I know that banks / larger borrowers often approach this probblem by arranging currency hedging / currecy swaps. which are fixed rate swaps for the loan but is it possible to do this for Personal loans?
Hedging strategies and currency swaps are great if you have tens of millions in one currency and want to hedge against fluctuations between that currency and another. They are not appropriate or even available for someone whose debt load is for educational expenses.
Swaps are customized contracts between two parties; as such they are very expensive to enter into (the intermediary charges large fees), and so they are only appropriate for parties with very large amounts of currency to exchange.
posted by dfriedman at 6:34 AM on May 12, 2010
Hedging strategies and currency swaps are great if you have tens of millions in one currency and want to hedge against fluctuations between that currency and another. They are not appropriate or even available for someone whose debt load is for educational expenses.
Swaps are customized contracts between two parties; as such they are very expensive to enter into (the intermediary charges large fees), and so they are only appropriate for parties with very large amounts of currency to exchange.
posted by dfriedman at 6:34 AM on May 12, 2010
To your questions:
1 - Given my experiences, it is highly unlikely one could move the debt. As mary8anne points out, getting a replacement loan in Europe would be the way to do it, using that loan to pay off the Canadian loan. Do your Canadian student loans have any early payoff fees or penalties?
2 - Impossible to say, really, and depending on the amount you owe, perhaps not worth the hassles. I do not need to tell you that currencies are volatile, so were you to take a European loan, and then the Euro just crushes the Canadian dollar for years on end, you would likely suffer regret. Taking loans, of course, means things like origination fees and the like, which make sense if you owe a lot and are getting a better rate, such as in a mortgage refinance. If the interest rate on that line of credit is subsidized (as student loans are, to a degree, in the US), then I would keep the loan in Canada, most likely.
3 - Sorry, no. Consumer banking is one area where globalization has had zero impact. As someone in a similar situation to yours, I feel your pain, but cannot ease it. Hopefully others are more creative with their suggestions.
As you pointed out, right now the Euro is diving, and quickly. For the foreseeable future, it is going to be down until the Greece fiasco plays out. I would bide your time and revive these thoughts next time it hits some awesome high point.
posted by dalea at 6:34 AM on May 12, 2010
1 - Given my experiences, it is highly unlikely one could move the debt. As mary8anne points out, getting a replacement loan in Europe would be the way to do it, using that loan to pay off the Canadian loan. Do your Canadian student loans have any early payoff fees or penalties?
2 - Impossible to say, really, and depending on the amount you owe, perhaps not worth the hassles. I do not need to tell you that currencies are volatile, so were you to take a European loan, and then the Euro just crushes the Canadian dollar for years on end, you would likely suffer regret. Taking loans, of course, means things like origination fees and the like, which make sense if you owe a lot and are getting a better rate, such as in a mortgage refinance. If the interest rate on that line of credit is subsidized (as student loans are, to a degree, in the US), then I would keep the loan in Canada, most likely.
3 - Sorry, no. Consumer banking is one area where globalization has had zero impact. As someone in a similar situation to yours, I feel your pain, but cannot ease it. Hopefully others are more creative with their suggestions.
As you pointed out, right now the Euro is diving, and quickly. For the foreseeable future, it is going to be down until the Greece fiasco plays out. I would bide your time and revive these thoughts next time it hits some awesome high point.
posted by dalea at 6:34 AM on May 12, 2010
oh and yes since the Euro is in such a poor state is would be a very bad time to transfer your loan to Euros. (unless it never recovers.. then now is actually a good time)
I'm in a similar / revese situation with savings in £GBP that i'd wanted to move into AUD but its a very bad time to move that way. - unless of course you beleive that the £ is goign to contiune to loose value and never recover.....
posted by mary8nne at 6:43 AM on May 12, 2010
I'm in a similar / revese situation with savings in £GBP that i'd wanted to move into AUD but its a very bad time to move that way. - unless of course you beleive that the £ is goign to contiune to loose value and never recover.....
posted by mary8nne at 6:43 AM on May 12, 2010
Response by poster: Thanks all for the input. Interesting to consider. It was a student line of credit, so I am getting prime plus about 1.5%, if I recall correctly.
Transferring the money is dead easy right now, with my XE trade account, so transferring the debt just for convenience isn't so necessary. I think I will keep it how it is for now, but if the euro comes up to 1.5 CDN or higher, I might then take out a loan here and pay off the CDN while the exchange rate is decent.
But just to know my options, I think I will take a look at the present cost in euro of both options under best and worst case scenarios (including all startup, early payoff and transfer fees, etc - considering a rising or falling euro with rising and falling interest rates in each country over the next 7 years). It would be a good excel sheet to keep on hand.
posted by molecicco at 6:57 AM on May 12, 2010
Transferring the money is dead easy right now, with my XE trade account, so transferring the debt just for convenience isn't so necessary. I think I will keep it how it is for now, but if the euro comes up to 1.5 CDN or higher, I might then take out a loan here and pay off the CDN while the exchange rate is decent.
But just to know my options, I think I will take a look at the present cost in euro of both options under best and worst case scenarios (including all startup, early payoff and transfer fees, etc - considering a rising or falling euro with rising and falling interest rates in each country over the next 7 years). It would be a good excel sheet to keep on hand.
posted by molecicco at 6:57 AM on May 12, 2010
This thread is closed to new comments.
I know that banks / larger borrowers often approach this probblem by arranging currency hedging / currecy swaps. which are fixed rate swaps for the loan but is it possible to do this for Personal loans?
posted by mary8nne at 5:02 AM on May 12, 2010