What is a green loan for electric vehicles, solar and energy-efficient homes?

Green Loans: what you need to know

What is a green loan?

A green loan – sometimes called a renewable loan or green financing – is a type of personal, car or home loan that helps to fund the purchase and/or installation of approved clean energy products. They often offer lower interest rates than regular loans, which incentivises households to transition to more sustainable forms of energy and transportation.

Who is eligible for a green loan?

Green loan eligibility criteria may mirror the eligibility criteria for other financial credit options. A lender may consider the following when assessing your eligibility for a green loan:

• Your age

• Your income, assets and debts

• Your employment status

• Your credit score and credit history

• Whether you have filed for bankruptcy

• Your Australian citizenship or residency status

• What you intend to use the loan for.

In some cases, interest rates and other conditions will vary based on the information you provide.

Green car loans can help you finance an electric vehicle such as a Tesla Model Y. Image: Matt Harvey

What can you buy with a green loan?

In general, green loans can finance products that reduce energy or water consumption, reduce your reliance on the power grid, or reduce carbon emissions. Depending on the eligibility criteria of the lender, these products may include:

• Solar panels and solar batteries

• Electric vehicles

• EV home chargers

• Energy-efficient homes

• Energy-efficient appliances, such as hot water systems and air conditioners

• Home insulation, such as double glazing for windows

• Water tanks

Exactly what you can buy with a green loan depends on the financial institution you are borrowing from. Remember to check with your lender that your specific purchase qualifies for their green loan.

Buying solar panels with a green loan

Solar panels may be a good choice to purchase with a green loan, especially as Victorian households get solar-ready for summer to take advantage of the extra sunlight. Since air conditioning and cooling costs spike in summer, installing rooftop solar panels is a great way to reduce energy bills. If you want to install solar panels, you may also be eligible for a solar rebate as well as a green loan.

Buying a solar battery with a green loan

Solar batteries help eliminate energy bills by allowing you to store excess energy generated by your solar panels for later use – such as at night-time or charging an electric vehicle. Some solar batteries can even supply households with back-up power during blackouts and power outages. If you want to install solar batteries, you may also be eligible for a solar rebate as well as a green loan.

Buying an EV with a green loan

Electric vehicles are becoming more popular with Australian car owners as fuel prices continue to rise, especially now that more public charging stations and home charging options are becoming available. Some state and territory governments in Australia now offer drivers rebates, discounts and other incentives to switch to an EV.

RACV Green Loans are available to finance the purchase of an EV since they help to reduce carbon emissions from transport.

Popular EV models that may be eligible for a green car loan include the Tesla Model 3, Tesla Model Y, BYD Atto 3, Kia EV6, Hyundai Ioniq 5, Polestar 2, Nissan Leaf and Hyundai Kona.

Buying an EV home charger with a green loan

EV home chargers allow you charge your electric vehicle faster at home compared to a standard AC outlet. Household EV charging adds convenience to EV driving, and you can even charge your car using solar power if you have an appropriate solar system setup. Learn more about charging an electric vehicle at home here.

Buying insulation with a green loan

Household insulation can make a big difference to your energy bills. Poorly insulated rooms need more power to keep interior temperatures warm or cool enough. Conversely, quality home insulation is a great way to future-proof your home energy rating, which may become an important selling point for house sales in future. Green loans may enable you to upgrade your ceiling, floor and wall insulation or double-glaze your windows to lock out the heat in summer and the cold in winter.

Buying appliances and white goods with a green loan

You can purchase energy-efficient replacements for household appliances and white goods with some green loans. The average Australian home contains several energy hogs that contribute to increased energy consumption, such as refrigerators and freezers, clothes washers, clothes dryers, dishwashers, air conditioners, cooktops, and inefficient lighting.  
 
Split-system or reverse-cycle air conditioners are particularly popular with green loan applicants as heating and cooling contribute to 40% of a household’s energy consumption. Pay careful attention to Energy Rating Labels and Water Rating Labels on new appliances: a green loan will likely specify a certain level of energy or water efficiency required.

Buying a house with a green home loan

If you’re in the market for a new home, you may be eligible for a green home loan. Purchasing a highly energy-efficient house with a green home loan could land you lower interest rates compared to traditional home loans.

Buying a hot water system with a green loan

Green loans may allow you to purchase a hot water system that uses less energy, such as a heat pump hot water system. Since hot water systems are typically the second largest energy users in Australian homes, replacing old and inefficient water heaters may be a pathway to reducing energy consumption and bills.

Buying water tanks with a green loan

Installing water tanks can reduce your household’s water bills. Water tanks collect rainfall to supply water for gardening, washing cars and filling up the pool. Depending on your rainwater quality, you could also use rainwater to flush your toilets, wash your clothes, have showers or even drink the rainwater you harvest using water tanks. You’ll need to hire a licensed plumber to connect your rainwater tank to any indoor water supply lines. Learn about other ways to save water at home here.

Heat pump hot water systems can help reduce energy bills. Image: Matt Harvey

Do green loans offer lower interest rates than other loans?

Green loans may offer lower interest rates compared to traditional loans.

That’s because lenders want to incentivise borrowers to switch to more eco-friendly, energy-efficient products.

Which green loan is best?

Always compare available green loans before deciding which is right for your needs. When comparing green loans, you should weigh up:

• what the interest rate is

• whether the interest rate is fixed or variable

• whether the loan is secured or unsecured

• what loan term (length) is offered

• what fees you may have to pay (for example, establishment fees, monthly fees, penalty fees, and early repayment or exit fees)

• whether you will be able to afford repayments on time.

You can also consider using a credit card or applying for a traditional loan, but green loans will almost always provide lower interest rates for more affordable repayments.

^{R.A.C.V. Finance Limited ABN 82 004 292 291 Australian Credit Licence No. 391488. RACV Finance is subject to RACV lending criteria. Conditions, fees and charges apply.}