The short version
- Green loans pay for things like solar panels, batteries, heat pumps and electric cars, often at a lower rate.
- Lenders usually pay the installer or dealer directly and want a quote that shows the item qualifies.
- Check for government rebates first, as they can cut what you need to borrow.
What a green loan covers
Green loans are personal loans for things that cut energy use or emissions. Lenders each keep a list of what qualifies, usually solar panels, home batteries, heat pump hot water, insulation, and electric or hybrid cars.
In return, many lenders charge a lower rate than on their standard personal loan. You'll usually need a quote or invoice showing what the money is for.
Things to check
Look at the comparison rate as well as the interest rate. The comparison rate adds the lender's standard fees to the interest rate for an example loan, so it shows the cost of two loans on the same footing.
Check whether the loan pays the installer or seller directly, how long approval takes, and whether a state government rebate or interest-free scheme could cover part of the cost first.
Pros
- Lower rates. Many lenders discount green loans to encourage energy saving purchases.
- The savings help repay it. Lower power bills from solar or a battery can cover part of each repayment.
- Some are secured against the item, which keeps the rate down further.
Cons
- Only for approved items. The lender decides what qualifies, and may need an accredited installer.
- The savings aren't guaranteed. How much a system saves depends on your use and power prices.
- Some need security, so check what happens if you sell the home with the system on it.
Alternatives
- A green home loan or a top up. If you have a home loan, adding to it can be cheaper, though you'll pay it off over a longer time.
- Rebates and state schemes. Some states offer interest free loans for solar and batteries.
- Saving first. If the cost can wait a few months, saving for it costs nothing in interest, and a high interest savings account pays you instead.
How to apply
Applying for a green loan usually takes 15 minutes online. Most lenders give a decision within a day or two, and some within the hour.
- Check your rate first. Many lenders show the rate you'd get with a soft check, which doesn't show as a credit enquiry, before you formally apply.
- Have your details ready. Lenders ask for ID, payslips or tax returns, your spending, and the debts and credit limits you already have.
- Apply to one lender at a time. Each formal application is recorded on your credit report, and several close together can make lenders more cautious.
- Read the contract before you sign. Check the comparison rate, every fee, and what happens if you repay early or miss a repayment.
- Get a written quote from an accredited installer or dealer. Most lenders need it to approve the loan.