You may not want to miss your best friend’s wedding in New York. You try to juggle your finances to pave the way for travel bookings. However, you are left with limited savings after paying the bills and other important payments. You check your “season ticket”, but it reveals “Update now” status. The panic crept in as you did not expect that. You cannot delay the ticket bookings any longer, or you may miss the wedding. You try to get help from your other buddies, but you still need more.
You don’t have to worry, as you won’t miss your best friend’s wedding. You can reach out to your employer for assistance. He may help you fund the costs with quick loans. Later, you can repay the amount they transfer in instalments from your monthly earnings.
Briefly, an employee-based loan for employees to use facilities like rail, bus, etc., is known as a season ticket loan. The blog discusses these loans in detail.
How would you define a season ticket loan?
A season ticket loan is a benefit or an interest-free loan that employers across organisations, universities, and companies offer to employees to fund the upfront costs to buy an annual/quarterly public transport ticket. It prevents the employee from buying the ticket out of limited savings. Here, an employee pays the due from salary deductions. The repayments remain the same and are spread over 10-12 months.
The most essential factor here is that one must clear the bill before the ticket’s validity ends. It means you don’t owe any money when the ticket expires. Moreover, the person must be employed at least until the season ticket validity ends in the same company. Make sure that the contract does not end before that.
Why is a season ticket loan facility important?
A season ticket loan is a win-win for both the worker and the employer. It is because employees provide an essential benefit to cover the upfront commuting costs. Buying tickets from employers is a cheaper option than purchasing them from a vendor. One can get this fast loan within the same day.
Moreover, employees have more flexibility to reschedule the repayments if their monetary circumstances change. They can interact and discuss directly with the employer, for one. This results in significant savings by buying in bulk instead of paying individually every day for commuting services.
For employers, it may mean cultural inclusivity and a basis for attracting talented minds. It helps them retain the maximum number of their employees and support a holistic approach.
How does a season ticket loan work?
An employee applies for a season ticket with their specific employer. The company may provide a portal or application from which employees can apply for that. While applying, the employee must share some information about their commute. It could be the route you take and the price of the seasonal ticket.
The employer reviews the application and approves if everything goes fine. Employers can provide a seasonal ticket in multiple ways.
For example:
- Employers can purchase the ticket on the employee’s behalf
- Employers can provide the cash value of the ticket to the employer to purchase the specific tickets.
Employees don’t need to pay any interest on a season ticket loan. It makes the loan more attractive in the worker’s eyes.
How much can you achieve on a season ticket loan?
Employees can typically get an amount of up to £10000 on a season ticket loan. It does not trigger any taxable benefit for employees. Also, the specific amount an employer gets depends on other factors, too. These are the employer’s policy, the cost of the ticket, HMRC tax regulations, and the Loan type. Some season ticket loan providers like 1st Class CU and the University of Oxford provide up to £4000 (maximum).
What can one use season ticket loans for?
The public transport season tickets can only be used for transportation and parking costs. One cannot operate it for anything other than that. Here is the clear differentiation:
| Aspects one can use a season ticket for | Aspects one cannot use a season ticket for |
| Public transportation | You cannot use a season ticket for personal use. Instead, you can tap it only to get financial assistance to commute to the workplace and back. |
| Parking costs | You cannot tap the ticket to use a hired car or a personal vehicle. |
How would you explain the season ticket loan costs with an example?
It does not cost an employer much to set up a season ticket loan scheme. However, the expenses still should be within the company’s financial limit. The actual cost of the travel loan depends on the type of commuting vehicle the employee uses.
For example, an individual using a train to travel has more monthly transportation expenses than one using a bus. It also depends on the route and the distance covered. Here are other aspects that the season ticket loan costs depend on:
- The two stations the employee travels between
- How many days does one need a ticket to travel?
- Whether it’s a criterion or a first-class trip.
- The period of the seasonal ticket
- Whether the employee has an active rail card.
Example of a season ticket loan
Let’s cover a story of Jane, who works at the University. Her Annual season ticket costs 3600 pounds as she travels to the workplace by train. Here, the loan employer offers an interest-free season ticket loan. He deducts the amount monthly for 12 months from the salary.
Step 1– The Upfront cost is high to cover with basic salary. Thus, Jane applies for a season ticket loan to cover the expenses. She applies to the HR department before the ticket expires.
Step 2- The university approves the loan of £3600 for 12 months of repayments. She gets these instant loans as she matches the criteria. They do not charge any interest on that. It means Jane must pay only £3600 on the loan.
Step 3- The university deducts £300 (3600÷12) every month from her bank account as repayment. The deduction happens from the salary itself. She does not have to set reminders for payments.
Step 4– The university clears the payment to the train’s company on Jane’s behalf. She gets the ticket and can travel without constraints for a year.
Benefits for Jane:
- She does not have to pay any interest on the loan
- No upfront costs
- Convenient and manageable repayments
- Saves money than buying individually
Bottom line
Season ticket loans are an interest-free financial facility provided by employers across companies and universities to employees. The loan helps cover the commuting costs to the workplace. If one struggles to recharge the bus or train facility due to low income or savings, they can consider this facility. One can repay the dues according to the comfort.
