Go Green With A Green Personal Loan

February 24, 2021

Thinking of making your life a little greener? A green personal loan could be well worth looking into. Unlike standard personal loans, which can be used to cover pretty much anything, green personal loans are designed to fund environmentally friendly purchases, such as hybrid cars, solar panels and water tanks.

Credit World Australia - Green Personal Loans

So, why would you choose a green personal loan over any other type of loan? The main benefit of a green personal loan is its typically lower interest rate. Lenders that provide green personal loans reward borrowers for their eco-friendly intentions by providing them with a lower rate than those applied to their standard personal loans, which lowers the cost for you, the borrower.

In this post, we’re going to cover all the essential info you need to know about green personal loans, so you can decide whether this type of loan is right for you – and your intended purchase. We’ll also look at the various green personal loans out there, their various pros and cons, and how to compare what they have to offer.

What is a Green Personal Loan?

A green personal loan works in exactly the same way as any other type of personal loan – apart from the fact it can only be used to fund ‘green’ purchases. So, as you might expect, it allows you to borrow a certain amount so you can spread the cost of your green purchase, and you then repay the amount borrowed over a specified period of time, alongside any interest and fees.

Well then, what exactly is a ‘green’ purchase? Each lender will specify exactly what their green loans can be used for. Some green loans may focus on car purchases, allowing you to invest in a hybrid, electric or low emissions vehicle. Other green loans offer a wider scope and can be used to cover the cost of purchases that may include solar panel installation or a greywater treatment system.

When we get to the various green loans and lenders later, we’ll cover what each one can and can’t be used for. In the meantime, here is a list of the type of green purchases you could look to fund using a green loan, to give you an idea of your options as a borrower.

  • Solar panels
  • Solar hot water systems
  • Solar battery systems
  • Solar pool heating units
  • Water tanks
  • Greywater treatment systems
  • Double glazing
  • Energy-efficient lighting
  • Energy-efficient air-conditioning units
  • Energy-efficient white goods
  • Eco-friendly or ‘green’ vehicles

Choosing a Green Car Loan

In the world of personal loans, there are loans that can be used for almost anything – holidays, home renovations, weddings and the like – and loans that focus solely on vehicle purchases. The same applies to green personal loans. This is where the aptly-named green car loan comes in.

You can, of course, use a general-purpose green personal loan to buy a green vehicle (as long as the loan allows it), however, there is the option to apply for a green car loan as well. Designed solely to fund the purchase of green vehicles, these green car loans are often secured, which lowers the cost of the loan even more.

What is a green vehicle? Each lender will vary in its definition of what a green vehicle is, so it’s a good idea to check how ‘green’ your vehicle needs to be in order to be eligible. In general, green cars are those that produce lower emissions than traditional fuel-powered cars of a similar size.

Examples of what lenders may consider being green cars are low emissions vehicles, electric vehicles, hybrid electric vehicles and certain types of new cars with green credentials. You may also find some lenders classify electric bikes as green vehicles as well, allowing you to cover such smaller purchases, while still benefiting from a lower cost loan on your daily commute.

Pros and Cons of Green Personal Loans

When weighing up your personal loan options, it can be helpful to look at the pros and cons as you make a decision. Here are some pros and cons associated with choosing green personal loans.

Lower Interest

Generally speaking, you will find green personal loans offer a lower rate of interest than standard personal loans offered by the same lender. With this lower rate, you could take advantage of a number of beneficial situations.

  • Smaller Repayments. When you pay a lower rate on your loan, your repayments will be lower than that of a loan of the same amount with a higher rate, borrowed over the same period. Lower repayments could make the loan easier to manage, meaning you have to set aside less each month to cover the cost of repaying your loan.
  • Faster Payoff. As you are paying less interest with your lower rate, you could apply for a loan over a shorter period, to pay off your debt faster.
  • Higher Loan Amount. Knowing that you are paying less in interest, you could choose to borrow more, knowing that even with the higher amount, you can still afford your repayments each month.

TIP. Before settling on a loan amount, loan period and repayment schedule, be sure to allow for wiggle room in your calculations. Unless you choose a loan with a fixed rate, you have to take into consideration the fact that your rate could go up at any time. This will increase the amount you pay in interest, and will likely increase your repayment amount.

Case Study

Casey wants to borrow $10,000 to cover the cost of installing a solar system in her home. She looks at two personal loan options: one standard personal loan with a rate of 10.5% p.a., and a green personal loan with a rate of 7.5% p.a.

  • Smaller Repayments. Choosing to repay the loan over five years, Casey’s monthly repayments on the standard loan would be $215, with an overall interest cost of $2,896. On the green loan, her repayments would be $200 per month, with an overall interest cost of $2,023. With this option, Casey would pay $15 less per month with the green loan, and $873 less in interest overall.
  • Faster Payoff. Working out she has a bit more money available to cover her monthly repayments, Casey looks at loans offered over four years. Opting for a green loan, her repayments would be $242, while with the standard loan, her repayments would be $256. She would pay $684 less in interest on the green loan over this shorter loan term ($1,606 compared to $2,290 interest on the standard loan).
  • Higher Loan Amount. Weighing up whether she could afford to borrow more to allow her to install a better solar system, Casey looks at borrowing $12,000 over four years. With the green loan, her repayments would be $290 per month (paying $1,927 in interest), while with the standard loan, her repayments would be $307 per month (paying $2,748 in interest, which is $821 more).

With that being said, just by choosing a green loan doesn’t guarantee you the lowest rate on the market. Rates vary from lender to lender, which means a standard personal loan from one lender could offer a lower rate than a green loan from another lender. Which is why it’s so important to compare your options for both suitability and overall cost before you apply.

Lower Fees

While this depends on both the loan and the lender, some green personal loans charge fewer fees than standard personal loans. Again, this is something to compare within the market, making sure to look at both fees and interest to determine the overall cost of the loan.

Limited Availability

The concept of green loans is fairly new, so while you may find a vast range of standard personal loans to choose from, the choice of green loans – especially green car loans – is still relatively limited. If you’re looking for a loan with particular features, the restricted choice may limit your options.

Strict Lending Criteria

As with any loan, you will have to meet the lender’s eligibility criteria in order to be approved. However, with a green loan, you will have to meet further lending criteria to meet the ‘green’ standards of the loan. Depending on the lender, this could be quite strict, which again would limit your options either in terms of which loans you can apply for – or which green products you buy.

Going Green

Having run through the various benefits of choosing a green loan, let’s quickly look at reasons why you might want to go green in the first place.

First and foremost, going green allows you to do your bit for the environment. By choosing a green car, you reduce your emissions, thereby lowering the negative impact your car has on the environment. Other options, such as installing solar panels, allows you to take advantage of renewable energy, reducing the need to access the grid and its reliance on fossil fuels.

Another reason to go green could be to get off that grid and become more self-sustaining. While doing this can come with a higher initial cost – a cost that could potentially be funded by a green loan – it could offer bigger savings in the long run.

Lastly, you may choose to go green to save money. Going solar is a great example of this. Again, you have a high initial outlay, but by using solar energy to run your home, you could save big on your electricity bills over time. Let’s check out an example.

Oliver lives in Sydney. He typically pays $2,000 each year on his energy bills. He installs a system with 6.6kW of panels and a 5kW string inverter on his North East facing home at a cost of $6,600. In his first year, his savings would be $1,883. Over a period of ten years, he would save $20,085.

If you want to see how much you could save by going solar, check out the SolarQuotes calculator. You will need to input your postcode, the system you’d choose, the direction your home faces, how much your energy provider charges per kWh, and how much you pay on your energy bills over a year.

What About Government Rebates?

As we mentioned in the previous section, the initial outlay of going green can be high. This is why various government incentives have been put in place to lower the cost, and to encourage more people towards a more sustainable future.

Government incentives and rebates vary from state to state, so it’s a good idea to check what’s available in your state or territory before you invest. It’s also worth remembering that each incentive tends to come with eligibility criteria that you will have to meet in order to apply. As an example, some incentives may only be available to households with an annual income under a certain amount.

TIP. Rebates and incentives may be limited in number, offered in ‘rounds’ each quarter or each year. If this is the case for the incentive you’re interested in, find out when each new round is released, and be ready with everything you need to apply to get in fast.

What’s on offer right now? While we won’t go into government incentives throughout each state and territory, we will look at NSW and Victoria to give you an idea of what you might expect. To find out the details of what’s on offer where you live, simply search your state or territory-run government site.

If you live in NSW, you may be eligible to apply for the Empowering Homes solar battery loan offer. This offer helps homeowners in eligible postcodes access interest-free loans to install solar battery systems. These systems are designed to provide clean, renewable energy and can help you cut your energy bills.

Through this offer, you can get an interest free loan of up to:

  • $14,000 towards a solar PV and battery system (repayable over a range of terms up to eight years), or
  • $9,000 towards retrofitting a battery system to an existing solar PV system (repayable over a range of terms up to ten years).

In terms of eligibility, to qualify you must:

  • live in one of these postcodes
  • have a household income of no more than $180,000 per annum
  • own your grid-connected home, live in it and have the authority to install the system
  • satisfy the loan criteria.

If you live in Victoria, you could take advantage of the solar panel (PV) rebate currently on offer. With this offer, you could benefit from a rebate of up to $1,850 for solar panel (PV) system installation, available for both homeowners and on rental properties. Victorians can also access interest-free loans until 30 June 2021.

To qualify for this rebate, you must:

  • be the owner-occupier of the property
  • have a combined household taxable income of less than $180,000 per year (based on last year’s Australian Tax Office Notice of Assessment)
  • be installing the system on an existing property, valued at under $3 million
  • not have an existing solar PV system

Meanwhile, the Solar Homes Program is available to eligible Victorian households, offering a rebate of $4,174 to install a solar battery. Interest-free loans are not available under the solar battery rebate.

Note, these incentives are current at the time of writing.

Where Can You Get a Green Personal Loan?

Back to green personal loans. Which lenders offer green personal loans – and how do they work?

CommBank

The CommBank Green Loan is a 10-year secured fixed-rate loan with no establishment fee or monthly loan service fee. Customers with an eligible CommBank home loan or investment home loan can use the Green Loan to buy and install 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. Maximum loan size is $20,000 with a comparison rate of 0.99% p.a.

Note: CommBank states this product is currently in the pilot stage and is expected to launch in the coming months.

Bank Australia

By opting for the LEV Car Loan from Bank Australia, you will benefit from 1% off the bank’s standard car loan rate for choosing a low emission car such as a Tesla, Nissan Leaf or Hyundai Ioniq. The bank will also waive the $150 establishment fee usually applied to standard car loans. The bank’s car loans also offset your car’s carbon emissions for the life of the loan.

Loan amounts are offered over $1,000, with loan terms of up to seven years for new cars or five years for used cars. Interest rates from 5.45% p.a. (comparison rate 5.66% p.a.).

Community First

Community First offers a Solar Loan and Green Loan. Both are personal loans that can be used to finance the purchase of approved environmentally friendly products such as solar panels and hot water systems. There are no ongoing fees, extra repayment fees or early payout fees. Loans are offered on amounts over $1,000, over a period of one to ten years. Interest rates from 5.99% p.a. (comparison rate 6.26% p.a.).

Products covered by these loans include:

  • Solar hot water systems
  • Solar panels
  • Insulation
  • Split system, evaporative cooler or a high star rated, zoned air conditioner
  • Solar pool heater
  • External awnings
  • Rainwater tanks
  • Light Emitting Diode (LED) lighting
  • Double glazing
  • Photovoltaic (PV) panels and systems
  • Greywater treatment system
  • Energy-efficient white goods and appliances
  • Gas, solar, hydronic or reverse cycle air conditioners with a minimum 4-star rating
  • Highly efficient electric heaters (minimum 5 stars) or solar, hydronic or heat pump system
  • Battery systems being added to existing solar systems
  • New solar systems with attached batteries
  • Vertical axis wind turbines

Police Bank

With Police Bank’s Green Loan, you can benefit from a discounted rate only available for those borrowing for a green initiative. There are no ongoing account fees on this fixed-rate loan, with loan terms up to seven years. You may also qualify for the bank’s Reduced Fees program. Interest rates from 5.79% p.a. (comparison rate 5.92% p.a.).

Items available for purchase with this loan include:

  • Green Rated Vehicles with a Combined Tailpipe CO2 rating below 150g/km
  • Solar/photovoltaic (PV) panels
  • Battery systems to store solar energy
  • Solar hot water systems
  • Solar pool heaters
  • Solar hydronic heat pump system
  • Rainwater tanks and water pumps
  • Greywater treatment system
  • Insulation levels must be above the minimum level for the geographical area
  • Certified double glazing for windows
  • Split systems, evaporative cooler or a high star rated zoned air conditioners (with a minimum energy rating of 4 out of 6 stars or 6 out of 10 stars)
  • Gas, solar, hydronic or reverse cycle air conditioners (with a minimum 4-star rating out of 6 or minimum 6-star rating out of 10)
  • Energy-efficient white goods and appliances (minimum 4.5-stars out of 6 or minimum 6-star rating out of 10)
  • Water-efficient white goods and appliances (minimum 4.5-star rating out of 6)
  • Highly efficient electric heaters (minimum 5 stars out of 6)

Hunter United

The Hunter United Green Saver Personal Loan could help you cover the cost of installing solar, with an unsecured loan option offered over a loan term up to seven years. Borrow $2,000 to $30,000 with no ongoing fees or early payout fees, suitable for the purchase of solar and photovoltaic (PV) panels and solar battery systems. Interest rates from 6.99% p.a. (comparison rate 8.36% p.a.).

Bendigo Bank

With a Bendigo Bank Secured Green Personal Loan, you could invest in a green car. Loans are offered over one to seven years, on loan amounts $2,000 and above. There are low application and ongoing fees, with interest rates from 6.79% p.a. (comparison rate 7.21% p.a.). This loan is suitable for ‘A’ rated vehicles emitting less than 130g of CO2 per kilometre.

Meanwhile, the Bendigo Bank Unsecured Green Personal Loan is designed to fund green purchases such as solar power systems, solar hot water, greywater treatment systems and top energy-saving white goods. It offers a fixed rate from 11.79% p.a. (comparison rate 12.84% p.a.).

Bank First

Bank First offers an unsecured Green Personal Loan with a fixed rate or variable rate (interest rates from 7.25% p.a., comparison rate of 8.59% p.a.). You may use this loan to purchase:

  • Solar hot water systems
  • Energy-efficient white goods and appliances (excluding televisions) with a minimum 5 star rating
  • Greywater treatment systems
  • Solar panels and installations
  • Rainwater tanks and installations
  • Insulation
  • Double glazing
  • Wind turbines
  • External awnings

Bank First also offers a Green Car Loan with interest rates from 5.29% p.a. (comparison rate 5.56% p.a.). This low-interest rate is available on cars with a C02 value of 180 g/km or less. Generally, this will include new cars, hybrid cars or cars that have lower emissions for their size.

Australian Military Bank

With the unsecured Australian Military Bank Green Loan, you can borrow $4,000 to $40,000 over one to seven years. The provider states you can use the loan to fund energy, hot water, battery storage, insulation, energy-efficient cooling/heating, water capture and recycling, and 5-star rated or higher household appliances. Interest rates from 3.65% p.a. (4.59% p.a. comparison rate).

Police Credit Union

The Police Credit Union Solar Eco Loan is designed to fund the purchase and installation of solar energy products such as solar photovoltaic (PV) panels, home battery systems and solar water heaters. Loan terms are offered up to seven years, with no application or ongoing fees and no extra or early repayment fees. Interest rates from 4.69% p.a. (comparison rate 4.69% p.a.).

Bank of Heritage Isle

For details of the Bank of Heritage Isle’s Green Loan, see the Police Bank’s Green Loan. They are basically the same loan, offered by different providers.

Transport Mutual Credit Union

The GreenRoad loan from Transport Mutual Credit Union can be used to fund the purchase of electric vehicles, hybrid electric vehicles, electric bikes and Ride to Work bikes, solar panel systems and installation, and battery storage units and installation. This secured loan starts at $5,000, with no ongoing fees, offered up to seven years. Interest rates from 4.74% p.a. (comparison rate 5.04% p.a.).

Loans.com.au

With Loans.com.au, you can get a discount on your car loan when you buy a green vehicle. The lender offers a full list of approved cars but suggests your car may be on the list if it is a new or demonstration vehicle, if it is more fuel-efficient than average for a car of its size, or if it is a hybrid vehicle. If your vehicle qualifies you can save 0.7% on your car loan interest rate. Interest rates from 3.97% p.a. fixed (comparison rate 4.51% p.a.).

Sydney Mutual Bank

The Sydney Mutual Bank Green Loan has no establishment fee, approval fee, ongoing fees or early payout fee. Loans are available from $1,000 to $40,000, with loan terms up to seven years. Interest rates from 6.10% (comparison rate 6.10% p.a.). Approved products include:

  • Solar photovoltaic (PV) panels and systems
  • Tesla power wall
  • Energy-efficient lighting
  • Home ventilation systems
  • Solar hot water systems
  • Energy-efficient instantaneous hot water systems
  • Insulation materials to reduce consumer heating or cooling costs
  • Double glazing to reduce noise and provide insulation
  • Solar appliances

South West Slopes Credit Union

The Greener Futures Loan from South West Slopes Credit Union can be used to fund energy efficient or environmentally advantageous products. The loan has no establishment or ongoing fees, with loan amounts ranging from $2,000 to $20,000 over loan terms up to five years. Interest rates from 8.35% p.a. (comparison rate 8.35% p.a.). Examples of what the loan can be used for include:

  • Solar power products
  • External awnings or shutters
  • Greywater systems
  • Double glazing to the existing property
  • White goods

TIP. You can see each loan mentioned above gives both an interest rate and comparison rate. It’s worth noting that the interest rate provided may not be the rate you are approved for. The rate you pay will be determined by factors such as your loan amount, loan term and creditworthiness.

All rates and other details correct at the time of writing.

Green Banking

Looking to go green elsewhere? Not only can you choose from a range of other types of green loans out there, such as green home loans, you can also choose to go green with your banking. As sustainability becomes a greater priority in Australia, many banks, mutuals and other financial providers are making the effort to go green.

Bank Australia is a great example of a bank making great strides towards being environmentally responsible. While the bank certainly does a lot of work on its direct environmental impact, where Bank Australia really stands out is with its commitment to climate-friendly financing and products.

This is a bank that doesn’t lend money to fossil fuel companies and companies involved in other damaging industries like live animal export, gambling and tobacco. It also offers a number of environmentally friendly financial products. It has a Clean Home Loan and a green car loan – and all of its car loans are all carbon neutral as standard, which means the bank offsets the carbon emissions from each car for the life of the loan.

Meanwhile, these lenders refuse to provide finance to the fossil fuel industry.

  • Adelaide Bank
  • Australian Defence Credit Union
  • Auswide Bank
  • Bananacoast Community Credit Union
  • Bank Australia
  • Bank First
  • Bank of us (formerly B&E)
  • BankVic
  • BDCU Alliance Bank
  • Bendigo Bank
  • Beyond Bank
  • Cape Credit Union
  • Community First Credit Union
  • Credit Union SA
  • CUA (Credit Union Australia)
  • Defence Bank
  • Delphi Bank
  • ECU
  • Firefighters Mutual Bank (formerly Fire Board (NSW) Employees Credit Union)
  • First Choice Credit Union
  • G&C Mutual Bank
  • Gateway Credit Union
  • Greater Bank
  • Goulburn Murray Credit Union
  • Health Professionals Bank
  • Heritage Bank
  • Horizon Credit Union
  • Hume Bank
  • Hunter United
  • IMB
  • Intech Credit Union
  • Laboratories Credit Union (LCU)
  • Maitland Mutual Building Society
  • Northern Beaches Credit Union
  • Maleny Credit Union (MCU)
  • Maritime, Mining & Power Credit Union
  • ME Bank
  • MyState
  • Newcastle Permanent
  • P&N Bank
  • People’s Choice Credit Union
  • Police Bank
  • Police Credit Union
  • Qudos Bank
  • QBANK (Formerly Queensland Police Credit Union)
  • QT Mutual Bank
  • Queenslanders Credit Union
  • Rabobank
  • Regional Australia Bank
  • Rural Bank
  • Select Mutual Banking
  • Southern Cross Credit Union
  • South West Slopes Credit Union
  • Summerland Credit Union
  • Teachers Mutual Bank
  • Transport Mutual Credit Union
  • UniBank (formerly Unicredit)

Want to find out more about your green loan options? Simply give us a shout and tell us what you’re looking for in a loan, and we’ll take it from there.

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