We all know there are many things we can do at a personal level to help reduce our carbon emissions or reliance on the grid. But whether you are installing energy-efficient products in the home or upgrading to an electric vehicle, these green moves can come with a heavy price tag. Ideally, we would save up to make the purchase outright. But if that isn’t an option and you would like to make an environmentally conscious change sooner, a product you could think about is a green loan. And on average lenders are offering lower interest rated to consumers who want to put their credit towards ‘green products’, Canstar research shows. We explore below.
What is a green loan?
A green loan is a type of credit offered by a financial institution to a customer on the basis that they use that money for something the lender considers to be environmentally friendly.
What can a green loan be used for?
The types of products you can purchase using a green loan may vary between lenders, but in general it can be used to purchase products that are more efficient in energy or water usage, reduce your reliance on the grid or reduce pollution. It is a good idea to ask your lender directly to determine whether the purchase you have in mind qualifies for a green loan. For example, the product may need to meet a particular star rating in energy efficiency.
Some products that you may be able to purchase using a green loan include:
- Solar panels, hot water systems, pool heater or battery systems
- “Green” or eco-friendly vehicle
- Double glazing for windows or external awnings
- Water tanks
- Grey water treatment system
- Energy-efficient appliances and white goods
- Energy-efficient electric heaters or split system, evaporative cooler or energy-efficient air conditioner
- Home ventilation
How do green loans stack up against other loans?
Lenders say that they offer green loans as an incentive for consumers to switch to more efficient and environmentally friendly products. Often, the interest rates on green loans are lower than a standard personal or car loan.
For example, based on Canstar’s database, the average interest rates and fees for these loans compared to standard personal and car loans are shown below.
Green personal loans on Canstar’s database
|Secured car loans|
|Unsecured personal loans|
Source: www.canstar.com.au – 26/03/2021. Based on personal/car loans on Canstar’s database available for a loan amount of $25,000 and a loan term of 5 years. Average rates calculated based on the median rate where applicable. *Green loans defined as those that are specifically for environmentally friendly purchases (electric/hybrid cars, solar panels, battery systems, water tanks etc). Other upfront and/or ongoing fees may apply.
One complication with this product type is that the loan can only be used for approved purchases. So, for example, if you are doing a renovation, you would only be able to use some green loans for the components of the renovation that are “green”. You may end up requiring a separate loan for the remainder of the work. Additionally, there are fewer lenders who offer green loans compared to personal loans, which means your options are more limited.
Who is eligible for a green loan?
Beyond the purpose of the loan, eligibility criteria for green loans are typically similar to other credit products. When applying, the lender will consider factors such as your income, your credit history (and credit score), whether you are an Australian citizen/resident or if you have filed for bankruptcy. You will likely need to supply the lender with your personal details including address and phone number, and evidence of your income, employment status, assets and debts as well as information on what you intend to use the loan for. Using that information, the lender will decide whether to approve the loan and, in some cases, what interest rate or other variable conditions will apply based on your particular circumstances.
What green loans are available?
At the time of writing, there are a number of green loans listed on our database. It’s worth noting that these offers are at the discretion of the provider and can change at any time. Check with the financial provider for more information (e.g. how much you can borrow) and to determine what rate you may be eligible for based on your personal circumstances.
Australian Military Bank
Green Loan: Available for green purchases (e.g. battery storage, insulation, energy efficient cooling/heating, 5-star rated or higher household appliances).
LEV Car Loan: Available for low emission vehicles (e.g. Tesla, Nissan Leaf, Hyundai Ioniq).
Green Car Loan: Available for low emission vehicles with CO2 emissions of 180g/km or less.
Green Personal Loan: Available for green home improvements and lowering your carbon footprint.
Green Secured Personal Loan: Available for ‘A’ rated vehicles emitting less than 130g/km of CO2
Green Unsecured Personal Loan: Available for solar panel systems, solar hot water, grey water treatment systems or top energy saving white goods.
Environmental Flexi Personal/Car Loan, Environmental Low Rate Personal/Car Loan, Environmental No Fee Personal/Car Loan: Available for approved environmental purposes (e.g solar hot water and power, gas hot water, insulation, energy efficient appliances, vehicle with CO2 emissions of less than 180g/km [for car loans only], bicycle, water tanks/pumps, irrigation, replanting garden with natives, wind turbine, building a dam, sinking a bore).
Green Loan: Available for solar panels, battery storage, inverters, solar system and battery combo, off-grid system, solar heating and cooling improvement.
Green Loan (coming soon, available to customers with an eligible home loan with CommBank): Available for eligible small-scale renewables such as solar panels, battery packs and electric vehicle charging stations at the property used to secure their existing home loan.
Community First Credit Union
Green loan: Available for green purchases (e.g. solar hot water systems, solar panels, insulation, solar pool heater, rainwater tanks, double glazing, energy efficient white goods).
Endeavour Mutual Bank
Green loan: Available for selected green products (e.g. solar panels and systems, Tesla power wall, solar hot water, insulation, double glazing).
Green Saver Personal Loan: Available for solar & photovoltaic (PV) panels and solar battery systems.
Green Car Loan: Available for new cars with CO2 emissions rating of less than 188g/km.
Clean Green Car Loan: Available for new and demonstration vehicles with significantly lower than average CO2 emissions when compared to other cars of its size.
Green Loan: Available for purchase and installation of approved clean energy products (e.g. solar panels, home batteries, solar pool heating, energy-efficient lighting and air conditioning, hybrid low emission cars).
Green Loan: Available for green initiatives (e.g. solar panels and hot water systems, rainwater tanks, vehicles with a CO2 emissions rating of below 150g/km, top energy savings white goods).
Regional Australia Bank
Enviro Loan: Available for any purchase that is considered to enhance sustainability and be beneficial for the environment.
Summerland Credit Union
Eco Loan: Available for environmentally friendly purposes (e.g. solar energy generation, water treatment/recycling, rainwater tanks, roof insulation, hybrid motor vehicles/push bikes).
Sydney Mutual Bank
Green Loan: Available for selected green products (e.g. solar panels and systems, Tesla power wall, solar hot water, insulation, double glazing).
Transport Mutual Credit Union
GreenRoad: Available for electric or hybrid vehicles, bicycles, solar panel systems, battery storage units.
Source: www.canstar.com.au – 26/03/2021. Based on green loans on Canstar’s database and the providers’ sites. Green loans defined as those that are specifically for environmentally-friendly purchases (electric/hybrid cars, solar panels, battery systems, water tanks etc). List is not exhaustive, there may be other green loans available.
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