The ultimate guide to green loans
A green loan refers to money lent for the purchase of goods and services that benefit the climate. Various financial institutions in Australia meet the requirements to provide green loans, not just banks! To make things easy, we refer to any party that offers a green loan as a lender.
In this guide, you will learn everything about green loans, including what green loans are and what they can be used for, as well as the different types of green loans and their benefits. We also cover green loan eligibility and how to apply for a green loan.
Green loans, made simple.
What is a green loan?
A green loan is just like a regular loan but for the specific purpose of buying something good for the environment. Green loans still charge interest and fees, but they are generally lower than the interest and fees on a standard loan. Lower-fee, lower-interest green loans help homeowners purchase items like solar panels and battery systems without paying the lender high fees and interest. Common types of green loans include green home loans, green home mortgages, green personal loans, and green car loans.
Why the colour green? Green loans get their name from nature and the environment. Think trees, grass, forests, and other things associated with nature - they are green. Green loans being called ‘green’ happened organically as they were specific, cheaper loans designed to help people purchase products that were not only great for their homes but also for the environment.
What can green loans be used for?
Green loans can be used for purchasing energy-efficient technologies like solar panels, solar batteries, solar batteries, heat pump hot water systems, induction cooktops, electric cooktops, and reverse cycle air conditioning. Purchasing and installing these technologies using a green loan can be a great way to save money on your energy bills, increase the value of your home, and make it more comfortable to live in.
They can also be used for purchasing insulation, double-glazed windows, electric vehicles, and electric vehicle charging stations. Products that can be purchased with a green loan differ between lenders, so it is important to check if the product you want to purchase meets a lenders green loan eligibility criteria before you apply.
Most people will require a loan from a lender at some point. You’re probably familiar with the most common types of loans in Australia - home loans, car loans, and credit cards. Loans sometimes get a bad rap, but when used sensibly, they are an important financial tool that enable key life investments, such as purchasing or upgrading a home or starting a business. Green loans are a new type of loan that helps homeowners save on their energy bills, increase the value of their homes, and protect themselves against rising energy costs.
Green loan benefits
The main benefit of a green loan is that they are often cheaper than regular loans. This means they charge lower fees and lower interest than a regular loan which ultimately means you’re paying back less than you would on a standard loan. Lenders can offer lower-cost loans because these loans are considered lower-risk, and are subsidised by the government.
Home energy upgrades purchased with green loans are smart investments for your home. Products like solar panels, batteries, heat pump hot water systems, electric or induction cooktops, and reverse cycle air-conditioning will save you money on your energy bills.
Green loan purchases also increase the value of your home, improve safety, and are often more comfortable to live in. Upgrading your home with eco-friendly upgrades will not only save on your bill but will also increase the value of your home, improve safety, and are often more comfortable to live in. Energy-efficient homes can also help you qualify for a lower rate on your home loan.
Green loan types
There are different types of green loans, including green personal loans, green car loans, green home mortgages, and green home loans. The green loan that is right for you will depend on what you want to purchase and your personal goals and objectives.
Most people will require a loan from a lender at some point. You’re probably familiar with the most common types of loans in Australia - home loans, car loans, and credit cards. Loans sometimes get a bad rap, but when used sensibly, they are an important financial tool that enable key life investments, such as purchasing or upgrading a home or starting a business. Green loans are a new type of loan that helps homeowners save on their energy bills, increase the value of their homes, and protect themselves against rising energy costs.
1. Green home loans and mortgages
A green home loan or green home mortgage provides a discounted interest rate for a home that improves its energy efficiency or meets minimum standard energy efficiency requirements. Green home loans and green home mortgages encourage Australian homeowners to improve the energy efficiency of their homes as even a small reduction in a mortgage interest rate can lead to big savings over the life of the loan. Not all homes are eligible for green home loans and mortgages.
To discover if your home is eligible, send an email to hello@28watt.com.au and we’ll let you know what we need to determine your eligibility for a green home loan.
2. Secured green personal loans
A secured green personal loan is a green loan secured against your property. This means that if you fall severely behind on repayments, they could sell your home to pay back the loan - just like your regular home loan. A secured green personal loan is separate from the mortgage with the lender and payments are taken separately. The main benefit of this green loan type is that they are generally offered at a very low interest rate, reducing the amount of interest you'll pay over the life of the loan.
CBA, ING, and Westpac are the main lenders offering secured green personal loans. Learn more about security, compare secured green personal loans, or explore unsecured green personal loan options.
3. Unsecured green personal loans
Unsecured green personal loans don’t hold security over your home. While this means you can expect to pay slightly more in interest, the lender doesn’t hold security over your home and can’t force you to sell it if you fall behind on repayments.
Unsecured personal loans include Plenti’s Green Loan and Community First Bank Green Loan. Be aware of some lenders claiming to offer discounted green personal loans for energy-efficient purchases, but offering no discount on their interest rate. This is simply a marketing trick and they don’t reward you for making your home more energy efficient. These loans are easy to spot as they don’t have any additional eligibility criteria.
4. Green interest-free loans
Green interest-free loans may sound interesting, but these loans can often come with some nasty surprises, including higher up-front costs and additional fees. If you’re considering an interest-free green loan, be sure to read the fine print to try and uncover the hidden cost you may be paying.
Lenders charge the solar retailer an upfront fee known as a merchant fee to offer these loans. This fee is often added to your quote and can be as high as 35%! Read more on the hidden cost of interest-free green loans here.
Ask for a quote and tell your installer you require finance, and then ask for a cash price. See the difference for yourself!
5. Green car loans
Green car loans are a handy way to finance the purchase of an electric vehicle, or ‘EV’ as they are commonly known. Electric vehicles are becoming increasingly popular as fuel costs continue to increase. Using a green car loan to purchase an electric vehicle is a savvy way to reduce the total interest you’ll pay when compared with a regular car loan. Green car loans can be offered directly by dealerships, or by car finance brokers who have access to a panel of lenders who offer green car loans.
Green car loans often offer a rate discount on the lender’s regular car finance interest rate but are sometimes completely separate products. An added benefit of a green car loan is that the savings from no longer needing to purchase fuel can help you pay down the loan quickly.
Lowest repayment green loans
If you’re looking for a green loan with the lowest repayments, a green home loan or green home mortgage may be the right choice for you. Green mortgages and green home loans have the lowest repayments because the repayments are spread over the longest term.
The benefit of this type of green loan is that you’ll enjoy the biggest boost to your monthly cashflow and have more money to spend each month on the things you like. Plus, purchasing green products or improving your home to a certain energy-efficiency standard could allow you to access a discounted mortgage rate with certain green lenders.
Green home mortgages and green home loans are currently offered by the Commonwealth Bank of Australia (CBA), Bank Australia, Firstmac, and Gateway Bank. The disadvantage of spreading the repayments out over a longer term can mean you pay more interest. But, if you use your energy bill savings to pay your home loan off sooner, you can enjoy a win-win.
Sam's savings
ENERGY BILL
Current bill: $512 per month
Purchase: 9.6kW solar and 13.2kWh battery
Price: $19,236
New bill: $47 per month
Monthly savings: $465
Annual savings: $5,580
HOME LOAN
Current mortgage: $690,000
Eligible for rate discount: Yes
Rate discount: 0.6%
New mortgage: $709,236
Monthly interest savings: $438
Annual interest savings: $5,256
TOTAL
Monthly total savings: $903
Annual total savings: $10,836
Lowest interest green loans
While mortgages and home loans typically have the lowest interest rates of all loan products, this is not always the case for green loans. Green loans like the Commonwealth Bank Green Loan and Westpac Sustainable Home Upgrades Loan have a lower rate than the current average home loan rate. While these loans exist separately from the mortgage, they are secured by the home so it’s important to keep up to date with repayments and be proactive in talking to the bank if you may fall behind. Want to compare all green loan interest rates? Find a comparison table here.
Green loan banks and lenders
Green loans are becoming increasingly popular. Lenders like the Commonwealth Bank of Australia, Westpac, and ING offer green loans. Other lenders including Plenti and Community First Bank also offer green loans. Not all lenders offer each of the green loan types, so before comparing green loan banks and lenders, be sure to consider which product you want to purchase with a green loan. Complete our free home assessment to discover what products you could install in your home to start saving on your energy bills.
Green loan eligibility
To be eligible for a green loan, you must meet additional requirements when compared with a regular loan. Generally, only certain products can be purchased with the loan, as we discussed in the “What can green loans be used for?” section. Most green loans also require the product and installer you choose to meet minimum standards of compliance.
Did you know? 28Watt thoroughly vets all installers in its network to ensure their accreditations and licenses are up to date. This gives you peace of mind that what you’re installing meets all safety and compliance standards, so you can enjoy your savings without worry.
The standard lending requirements of each lender may differ, but lots of the basics always stay the same. For example, before applying for a green loan you should:
- Be employed, and earning an income of more than $25,000
- Not be bankrupt or in a Part IX Debt Agreement
- Not expect any changes to your budget that may impact your ability to pay back the green loan
You can always check your green loan eligibility to make sure you’re set up for success before comparing which green loan is right for you. This is important as green home loans in particular may include a requirement that your home meets a minimum energy efficiency standard, defined by its Nathers star rating.
Compare green loans
The first thing to consider when comparing green loans is which product you would like to purchase. If you want to purchase solar panels or a solar panel and battery package, you may want to consider a green home loan. You should also take a moment to consider your green loan eligibility before you spend time on an application.
If you’re unsure about what to install to make the biggest savings, start our free home assessment and see your results in less than two minutes.
Applying for a green loan
There are two ways to apply for a green loan, by yourself or with the help of a broker. Like a home loan, green loans can require a bit of paperwork and back and forth with the lender. This is because green loans have some additional criteria that the lender requires before saying ‘Yes’ that we outlined here.
Green loan brokers
A green loan broker can help guide you on which green loan will be best for your unique needs, and can also help submit the green loan application on your behalf. This reduces the time (and headaches) of the green loan application process so that you can focus on enjoying the savings on your next energy bill. Ensuring you’re getting the best green loan solution with the right lender can help minimise costs and maximise savings!
If you’d like to connect with a green loan broker, send us a message via email or WhatsApp.
Apply yourself
If you’re a savvy homeowner who can navigate the green loan application process, you can also apply yourself. While this could take a little more time, it gives you the flexibility to go at your own pace.
Handy tip! Make sure you’ve compared all available green loan options and consider your eligibility before you start the process.
Paying the old-school way
Products that benefit the environment don’t always need to be paid for with a green loan, they can still be paid up-front with cash, a debit card, or with a bank transfer. Paying up-front will help you avoid any interest and fees associated with a green loan. The main benefit of a green loan is that there is no up-front cost, so you can make your green investment to start saving on your energy bills and helping the environment without needing to save for several years.
Ready to see what you could be saving on your energy bills by making your home more energy efficient?