Season ticket loan or use ISA savings?

beckstrous

This is a monumentally stupid question to ask - I should be able to figure this out for myself - but please bear with me...

I'm starting a new job in London (civil service) next week, and a season ticket loan is available to me. If I get an annual ticket I save about £40 per month on the equivalent monthly season ticket price.

I can get an interest free season ticket loan but I would have to wait about a month for one. I am trying to decide whether to get the annual ticket out of my ISA savings (using up all but £600 of my ISA) or whether to pay the extra £40 this month, and wait for the loan.

My ISA earnt £30 in interest last year. The post is with the DWP. I don't have any other savings. But I think that between now and next April I could put a couple of thousand (at least) back into the ISA.

Which option makes the most financial sense?

yeesha04

Hi,

if i were u, i will use the savings and save the £40.00 and since u r confident you will be able to save up, y not save use the money u ve got, except u feel u will need the savings for something else and since u will have money coming in as per wages y not use the savings. thats just my opinion.

What position is it with the DWP u r starting. Goodluck

Rockporkchop

Get the season ticket loan, no question. Why use your savings when you can get an interest free loan deducted at source, so saving on tax too. There is no way I would use my savings to buy a season ticket if I didn't have to.

beckstrous

Thanks both for the replies.

Only thing is, I can't get the season ticket loan until about a month after starting - maybe more like 6 weeks depending on the pay run. Probably not until the end of November, so that means I would need to buy two monthly tickets in the interim, thus paying out an extra £80 (the annual ticket is £40 per month cheaper than the monthly). So would it not be better to use savings taking that into account?

Sorry, not good with figures!

Savvy_Sue

Remember that an annual season ticket runs for a year, so you're effectively paying out for it even when you're on leave.

If you're able to time the purchase of your tickets, you can sometimes save a bit by not having a ticket for the weeks you're on leave.

Don't know if this makes sense, but if, for example, you're taking a week off at Christmas then it could make sense to delay the loan until January (although factor in that prices usually go up then!)

sparkle84

Hi I think you should get the season ticket loan, keep your isa as you might need that money for somthing else throughout the year.

Could i also clarify two points season ticket loans are deducted after tax there is no tax saving to be made, however re the other point you get approx 2 month free travel with a season ticket i.e your 40 a month it is almost 500 pounds a years it is always cheaper to buy an annual season ticket unless you are planning to have 3 month off work in the year.

Savvy_Sue

sparkle84 wrote: »

Hi I think you should get the season ticket loan, keep your isa as you might need that money for somthing else throughout the year.

I think that is the clinching argument, isn't it? It is what I would do, despite what I said before, but really I was just suggesting that the OP should think about whether they are likely to take any leave before the loan comes through, because if they are then canny timing of season tickets can pay off.

BTW if there's a strike, you can get an extra day added to your season ticket.

LittleVoice

My opinion (and I know it's different from the others given above) -

If you have a cash-back credit card, use that to buy the season ticket for when you start. That would defer slightly the time when you would need to get at your savings as well as getting the cashback.

If you have a credit card but not a cash-back one, still buy with a credit card in order to delay payment.

Leave as much as you can in the ISA account. If it is this year's ISA and was already holding up to the limit then you won't be able to add more to it - but we are already half-way to the next tax year when you can open another one.

It is unfortunate that you will be losing the tax-free income on that money for the future - but perhaps you would be using the money for something in the next few years any way and there won't be much of a loss - given the current low rates of interest.

Because of those low rates, the interest-free nature of the season ticket loan is not as attractive as it once was.

And when it comes to renew your season ticket you know you will be able to get the loan.