Time to read : 4 Minutes
As a nation, Aussies are generally on board to reduce their energy footprint wherever possible.
In 2020, Australia led the world in solar energy installations, with a staggering 2.59 million solar panels now powering over 21% of homes.
The rise in home battery systems is impressive too:
over 22,600 were installed in 2019 alone
more than one-third of those households are now storing their energy for peak periods or living off the grid.
Our growing demand for renewable energy has led to a new type of finance product: Green loans.
What is a Green Loan?
A green loan is a type of personal, car, or home loan that helps fund eco-friendly purchases like solar panels or electric vehicles (EVs). Green loans encourage households to switch to more sustainable energy options across a range of products and services.
Who qualifies for green loans?
Eligibility requirements for green loans are similar to any other type of loan. Your lender typically looks at your:
age
income, assets, and debts
employment status
credit score and history
Australian residency status
loan purpose (what you intend to use your loan for example installing solar panels on your roof or buying an EV).
Note: interest rates and terms will vary depending on your lender and your specific situation.
What can you get with your green loan?
Green loans can be used for various eco-friendly products that reduce energy or water use, reliance on your power grid, or your carbon emissions.
While you could use a credit card or regular loan, green loans often have lower interest rates, making them a more affordable and attractive option for sustainable purchases.
Depending on your lender, you might be able to use green finance.
Important: check with your lender that the product you’re ready to buy is actually eligible for their green loan. You don’t want to be caught out!
Are green loans worth it?
As I mentioned earlier, green loans typically come with lower interest rates compared to traditional loans and there’s no question that it’s commendable to do your part for the planet.
Yes, but… does taking out a green loan actually help your wallet too? If you’re looking for ideas and are keen on long-term savings, here’s a green loans shopping list:
Solar panels
With a green loan, you can install your solar panels and potentially qualify for solar rebates and feed-in tariffs, keeping your energy costs as low as possible.
A solar battery
Another smart investment, because solar batteries let you store excess energy from your solar panels, so you can use it later; eg at night or during peak usage times. Some batteries even offer backup power during blackouts. You might be able to get both a green loan and a solar rebate to cover these costs.
EVs
As fuel prices rise and charging infrastructure improves, EVs are gaining popularity. Some state governments offer incentives for switching to EVs, and green loans can make buying one more affordable. Popular models eligible for green loans include the Tesla Model 3, Hyundai Ioniq 5, and Nissan Leaf.
An EV home charger
Want to charge your EV faster at home? You can even power it with solar energy if your setup allows. Green loans can help you cover this cost too.
Important: rebates and incentives for EVs and chargers vary from one state to another, so do your homework before you buy.
Hot water system
Water heating is one of the biggest energy uses in Australian homes and upgrading to a heat pump can reduce your bills and energy consumption. Over time, the savings can really add up when it comes to daily hot showers or baths for your whole family.
Water tanks
Collecting rainwater to use for gardening, washing cars, and indoor tasks like flushing toilets is also considered ‘greening’. They are a good way to maximise the benefits of mother nature.
Home insulation
Again, check with your lender, but as effective insulation makes a big difference in keeping your energy bills down, it’s possible to get a green loan for upgrading your ceiling, floor, and wall insulation or installing double-glazed windows to improve your home’s energy efficiency.
Appliances
These can make up a large portion of your home’s energy use. When you’re shopping for your energy-efficient appliances, look for high Energy Rating and Water Rating labels to ensure they meet your green loan requirements.
Can you buy a house with a green home loan?
Green home loans have been around since 2022, with some lenders offering loans for newly purchased or newly built homes. Other lenders offer top-up equity loans of up to $30,000 for adding eco-friendly upgrades like those listed above.
Green home loans can have lower interest rates than traditional mortgages, helping you save on both your home purchase and your home running costs.
Important: most lenders require your property to score 7 or higher on the Nationwide House Energy Rating Scheme (NatHERS) to qualify for their green home loan. According to the CSIRO, only 10% of new homes actually achieve this rating. The stats are even lower for greening an existing home.
Bottom line
While you can use regular loans or credit cards to greenify your home, green loans can offer a lower interest way to finance these upgrades.
Green home loans can be used to finance your new home and/or to make eco-friendly improvements to your existing property.
Not only do green loans typically come with lower interest rates, they also aid in making your home more energy efficient.
Green loans will likely save you money both in the renovation and/or purchase/construction phase of your home, as well as cutting down your home running costs over the long term.
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Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
