What Is A Green Loan? Everything You Need To Know

What Is A Green Loan? Everything You Need to Know

What Is A Green Loan? Everything You Need to Know

A recent study by environmental technology company GreenPrint found that well over half of Americans are happy to pay extra for sustainable products. Better yet, almost 80 percent of those studied would choose products clearly labeled as eco-friendly over their standard counterparts.

And this is an easy thing to say when it comes to small things like biodegradable laundry powder, bamboo toothbrushes, or fabric shopping bags. But does the same apply to big-ticket items like electric cars or solar panel installation?

Enter the green loan.

Thankfully, financial institutes are rising to the challenge of consumer demand for these larger sustainable purchases. This new type of loan is easier to get, has better features like low interest rates, and is designed to fund projects that help our planet.

Have we piqued your interest? Read on to learn more about how a green loan can help you meet your personal or professional sustainability goals.

What Is A Green Loan?

As the climate change debate heats up, more and more people are concerned about what they can do in their daily or working lives to protect the environment. In particular, cutting our reliance on fossil fuels, dropping our carbon footprints, and preserving local ecosystems.

Green loans are typically small loans taken out by individuals, homeowners, and businesses when they want to invest in eco-friendly initiatives or equipment for their home, office, or manufacturing complex.

Banks, peer-to-peer lenders, and specialized “green” lenders provide them to a person on the basis they’ll invest the money in projects or products with proven environmental benefits. This could be anything from an electric car or triple-glazed windows to geothermal energy systems or a vertical indoor farm.

Green loans are encouraged by the local and federal governments to inspire people to invest in green technology and practices. The loan system is guided by the Green Loan Principles (GLP), which aim to ensure loans are granted only when the environmental outcomes are positive.

How A Green Loans Differs From A Standard Loan

If you’re looking to go green, either professionally or personally, a green loan might be the solution. Green loans aren’t just outstanding because they’re focused on environmentally conscious investments. They also offer several conditions more favorable to the borrower than traditional loans.

These include:

  • Interest rates below 5%
  • No or low collateral requirements
  • Short loan periods (e.g., between 1 and 5 years)
  • Open to a wide range of credit scores

Green loans remove the barriers of having to front up with a deposit or home equity. This gives people with traditionally problematic credit scores or disadvantaged economic situations the opportunity to access these typically low rate loans.

And that means more people are investing in more products, solutions, and technologies that are good for, rather than harmful to, the planet. And possibly even saving those people money in the long run.

What Can A Green Loan Pay For?

In the second half of 2020 alone, the value of green issuance reached an astonishing US$269.5 billion across an enormous variety of products, products, and loan amounts. As a result, home and business owners across the US are increasingly seeing the value of going green. But what exactly are they investing in?

Water-Saving Initiatives

A typical family in America spends around $1,000 on water usage each year. And with water-saving systems in place, households can save hundreds of dollars on their yearly water bill.

Consider investing in some of the following water-saving technologies:

  • Replace old toilets with WaterSense-recommended models
  • Install soil moisture and rain sensors
  • Use timer-controlled or micro-irrigation in the garden
  • Green roofs
  • Ultrasonic cleaning technologies in appliances like dishwashers
  • Install volume reducing showerheads and faucets
  • Rainwater collection systems and wells

For people looking to shave their budget, getting a green loan for water upgrades makes a lot of sense. Not only will the loan be easier to pay back than a standard loan, but you’ll reap the rewards of lower utility bills in no time.

Converting To An Electric Car

Are you tired of pumping smelly, carcinogenic, ozone-depleting gas fumes into the air every time you head to work or take the kids to school? A green loan can help you afford to make the switch to a cleaner, green electric vehicle. You can find loan options for both all-electric and hybrid models, typically with fixed interest rates and loan terms over 80 months.

Green Home, Office, Or Factory Improvements

If you’re determined to save the environment, consider getting a green loan to help with the costs of larger-scale eco-friendly building improvements.

These renovations can make your home or commercial location more resilient to extreme changes in climate, less dependent on non-renewable resources, and as non-polluting as possible.

Common projects include:

  • Geothermal heating systems
  • ENERGY STAR approved HVAC systems
  • Insulation of ceilings, walls, or floors
  • Hurricane-proofing, such as shutters for windows
  • Double or triple-glazed windows
  • Eco-friendly landscaping, such as wild lawns
  • LED lighting

It can be easier to combine multiple projects under one green loan. This way, you can save time by undertaking the renovations together over a set period. It’s also easier to pay back a single higher loan amount rather than lots of small loans.

So consider this when planning your improvements.

Energy-Efficient Appliances

Good quality appliances don’t come cheap. So if you’re in the market for an upgrade on your freezer, dishwasher, or dryer but can’t afford the most energy-efficient options, you might be eligible for a green loan.

Many financiers will approve green loans for appliances with an ENERGY STAR rating, so keep an eye out for this label when shopping online or in-store. The organization rates products and technologies for homes, industrial complexes, and commercial buildings, so the certification isn’t only beneficial for homeowners.

Once installed, it’s important to use energy-efficient appliances with an eco-friendly mindset. This means turning them off when not in use and following the user instructions to ensure the most effective operation.

Not only will you save money on these products over time, but you’ll also potentially increase the value of your home by installing them.

Business That Help the Earth

If you’re a group or business looking to make upgrades, you can apply for a green loan to fund your projects.
Buying a greenhouse, starting a recycling or conservation program, installing water or energy management systems, investing in eco-friendly production materials or equipment, or purchasing land for an organic farm are all fair game. So long as you can demonstrate the environmental and community impacts of your project.

The return on investment is likely to be high as you’ll not only save money in the long run, but consumers are more likely to buy products they deem to be environmentally friendly.

Installing Solar

As solar panel technology has become more efficient and cheaper, more and more homeowners choose to go green with their household energy needs.

In fact, eco-energy experts expect residential solar installations in America to double by 2023. That would mean somewhere in the region of 4 million solar installations across the country in just a few years.

However, while solar is coming down in price, it’s still a fair chunk of change for the average person to afford. Taking out a green loan for solar installation makes the investment not only affordable in the short term but can also help you save money in the long run.

Not only will you save somewhere between tens of thousands of dollars over a few decades of use, but you might be eligible for rebates and tax credits.

How Do I Apply For Green Loan?

Are you wondering how to apply for a loan that’s green? The process is almost identical to applying for a standard loan. And even the lenders are likely to be the same institutions you already deal with, such as your bank.

Although the criteria are often lower, lenders will still check your credit score. So take the time to review your current position. Estimate the costs of the project, including getting quotations from providers, and the monthly payments.
Once you know how much you need and how much you can afford to pay every month, it’s time to compare lenders.

Many let you pre-qualify, which will allow you to get a better sense of the loan terms they offer.
After you’ve decided which lender looks right for you, gather all your documentation together and apply!

Ready To Shop For The Best Green Loan?

With so many advantages to a green loan–from low-interest rates to no need for a good credit score–it’s no wonder green loans are surging in popularity in recent years. If you’re looking for a loan to fund an environmentally friendly business or green home improvement, start looking at your green loan options.

Not only will you contribute to the ongoing health of our environment, but you’ll likely save yourself or your business a fair few dollars in the process. Just be sure to do your homework and compare lenders carefully. Look for loans with an interest rate, terms, and payment arrangements that fit your budget and situation.

For more great advice on eco-living, be sure to dig into the other articles on our website.

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