Season ticket loans

Commuting to work can be an expensive business. An annual season ticket to London terminals from nearby commuter town Guildford cost a cool £3,936 in 2021. That’s over £1,000 cheaper than buying 52 weekly tickets, though, so it’s worth stumping up the cash once a year. The further you travel, the bigger the savings you’ll receive by buying an annual ticket. However, many of us simply don’t have that sort of cash lying around.

Below, we weigh up your options for financing this purchase. While an interest-free loan from your employer will usually be cheapest, there are other options if this isn’t available. And whichever option you choose, make sure you buy your ticket before the annual fare hike in January!

How can I finance my season ticket?

• A loan from your employer

  A lot of employers will offer to finance their employees’ travel costs with an interest-free loan or through a “salary sacrifice” scheme. Although it requires some administration (and capital) on the part of the employer, it can be a valuable way for businesses to entice and retain employees.

  Before considering the options below, speak to your employer to see if they offer this service. Over the long term, it’s likely to be the easiest, safest and cheapest option. If your employer doesn’t offer this, consider asking the HR staff whether this is something they would consider adding as a benefit.

• A 0% credit card deal

  There’s a whole category of credit cards that includes introductory 0% interest deals in order to encourage customers to apply. With intense competition between banks to offer the longest 0% period, it’s even possible to bag yourself a card charging 0% for two years or more.

  Obviously a rate of 0% is hard to beat, but there are a few provisos to consider.

  First, you need to get approved for a card with a high enough credit limit – you’ll need a decent credit rating to be eligible for the market-leading 0% deals, and the repayments would need to be affordable for you.

  Secondly, you’ll need to be organised about how you use the card. The rate on the card will rocket after the introductory offer period, so it’s important to work out what you need to pay each month to stay on top of the debt. Card issuers only require you to make a small monthly payment, and it’s in their interests for the debt to continue as long as possible. There’s also a temptation to use the card for other spending.

  If you can get your hands on one of these deals, you could finance your season ticket purchase at no extra cost.

  Compare 0% purchase credit cards

• A personal loan

  If you can get approved for a loan with a competitive rate, this will allow you to pay for an annual ticket upfront, and spread the cost over 12 months. You’ll need to get the calculator out for this one, but if the total cost of the loan is less than the cost of 12 monthly season tickets (or 52 weekly tickets, depending on how you’d otherwise purchase the tickets), it could be a smart way to save money.

  Bear in mind that if you move on to pastures new, you’ll still have the loan to pay off. If you think that’s a possibility, you should check out the early repayment terms of the loan you’re considering before applying.
  Compare personal loans

• A commuter scheme

  With a commuter scheme you effectively take a loan from the scheme to buy an annual ticket, and then pay it back monthly. Like a loan from a traditional lender, your application will be subject to a full credit search.

  Check that any scheme you consider is authorised by the Financial Conduct Authority (FCA) and weigh up the overall and monthly costs against the other options listed above. Again, you should check the cancellation terms of any scheme before applying, particularly if there’s a chance you won’t need the full year of travel.

How should I compare my season ticket loan options?

Here are some of the key factors to consider when comparing your finance options.

• Overall cost. The total amount you’ll pay to a lender including the capital you owe, interest and any one-off fees. If you only compare one factor, it should be this one! Aim to keep the overall cost as low as possible, while ensuring the repayments are affordable.
• Interest rate. This is the amount of interest you’ll pay on your loan over the course of a year, expressed as a percentage. If you’re lucky enough to have an employer offering interest-free loans, this isn’t an issue, otherwise seek out products with the lowest possible interest rates.
• Fees. Some lenders add a one-off processing fee to their products, which can be payable upfront or added to your outstanding balance. Again, this is unlikely to be an issue if your employer has a scheme.
• Eligibility criteria. Each lender will list its own minimum criteria for applications. Ensure you meet these before you apply, but remember that meeting the eligibility criteria is not a guarantee of application approval. Each lender has its own methods of assessing your creditworthiness and may still reject your application if it considers you too much of a risk as a borrower.
• Loan durations available. The term of a loan is how long you can borrow the money for. As a general rule of thumb, the quicker you pay back your loan, the less it costs you in interest – so if you can pay for your annual ticket in six months, in theory it’s likely to cost you less than paying monthly. Lenders can offer different rates for different loan terms however, which is why it’s smartest to focus on the overall cost.
• Early repayment. Some lenders may charge a fee if you pay a loan back early, or charge interest for a set period beyond the date on which you overpaid. If there’s a possibility you’ll be moving on to pastures new, this factor will take on more importance in your comparison.

Am I eligible for a season ticket personal loan?

If you’re considering using a personal loan to finance you season ticket, the eligibility criteria typically cover some or all of the following:

• UK resident
• Minimum income
• Good credit rating
• UK-based bank or building society account that can pay direct debits

Even if you are deemed eligible by the lender, it’s up to you to ensure you can meet the repayments offered. Missed payments could incur a charge and could have severe consequences on your ability to obtain future credit. If you manage to get a loan through your employer, good news: the repayments will be deducted before your salary reaches your account, so you’re unlikely to miss a repayment.

The bottom line

Commuting may not be your favourite activity, but at least you can rest easy knowing it doesn’t have to cause you huge financial stress. If you put in a little work now to compare your options, you can feel smug in your seat on the train (provided you can get one) for the remaining 12 months!