I spent a summer in Crystal Palace near Croydon and believe me it's not close to central London. What you save in accommodation you will spend - or even more - in transport.

I suggest you look around these websites that have good offers, such as London nights or GTA hotels. Last summer we got a really good hotel where the standard price per night was about 299 pounds. I think we paid about 110 euros (about 75 pounds) per night. Not cheap, but an incredible offer anyway. And the hotel was just to die for.

Beware of bugs in London hotels, though.

EDIT: oh, also check www.tripadvisor.com Very useful, since you will get a picture of the hotel before you book a room.