The Green Deal loan offers a way to pay for energy-efficiency improvements to your home or business without any up-front costs
The Green Deal loan is not a personal loan in the traditional sense. The loan is attached to your property's meter and therefore your energy bills — not you — so if you move house the new occupier takes over the repayments via the energy bill.
Green Deal loan funds can only be used for energy-saving upgrades. You must have a Green Deal assessment carried out first and the work must be undertaken by a Green Deal provider.
What is a Green Deal loan?
A Green Deal loan is a cheap loan scheme to pay for energy-saving upgrades to your home, without any upfront costs. The cost of the improvements is absorbed into the future energy bills and paid back over an agreed period of time.
The loan is only for energy-efficiency measures installed through an accredited Green Deal provider. You must have your property assessed by an qualified Green Deal assessor who will determine what measures would be suitable for your home.
How does a Green Deal loan differ from a normal loan?
Unlike a normal loan, the Green Deal is available to everyone and is not dependent on your income or credit rating. The loan is attached to your property, not to you as an individual, which means if you move during the term of the loan, the debt passes to the new occupier.
If you miss any of your repayments, your energy supplier will handle this in the same way they handle a missed energy bill payment.
How the Green Deal loan works
There are five main steps involved:
- Apply for a Green Deal assessment via Green Deal Helpline
- Get a Green Deal assessment done on your property. This is a non-invasive, visual survey of your home that results in an Energy Performance Certificate
- You will also receive a Green Deal Advice Report, which includes eligible upgrades and projected household savings
- Choose the eligible upgrades and have them installed by an authorised Green Deal Installer (be sure to look for one carrying the Green Deal Quality Mark)
- Once installed, repayments begin via your energy bill (outlined as separate charge)
What interest rate applies to a Green Deal loan?
The interest rates will vary from provider to provider, although it is expected that they will be between 7.9% APR and 10% APR. It’s important to read the terms and conditions carefully and to get quotes from a number of providers so you can choose the one that’s right for you.
What should I look out for when taking out a Green Deal loan?
A Green Deal loan is a long-term financial commitment, so it’s a good idea to shop around for a provider and compare a number of quotes. Interest rates and the terms of the loan will vary depending on the provide. And remember, you don’t have to take up all of the recommended measures.
Also, you need to make sure the ‘golden rule’ really does apply to you. The ‘golden rule’ means your loan repayments should be offset by the energy savings you make as a result of the energy-efficiency improvements.
You also need to check if there are any early repayment charges and what impact these may have in the future. For instance if you come to sell your house and a buyer is unwilling to take on the debt, how much will you have to pay to settle the loan early.
Finally, make sure you compare the Green Deal loan with other financing options. When you add up any loan fees and interest over the loan term, does it makes more sense to apply for a more traditional/more competitive loan?
How do I repay a Green Deal loan?
A Green Deal loan is paid back in instalments through your energy bill, or, if you have a prepayment meter, a small amount will be taken from the meter each day.
The Green Deal Plan, which is the contract between you and the provider, should clearly state how your monthly repayments have been calculated, the total cost of the improvements, the term of the loan and the interest rate used.
What can a Green Deal loan be used for?
A Green Deal loan can be used for a wide range of energy-efficiency improvements to your home, such as loft or cavity-wall insulation, double glazing, draught proofing, a boiler upgrade or water efficient shower.
What other options are available other than a Green Deal loan?
It makes sense to compare the Green Deal loan with other financing options. For instance, you could choose to increase your mortgage to pay for the energy efficiency measures, or you could take out a personal loan.
Alternatively, if the cost of the work is around £1,000 or less, you could take out a 0% on purchase credit card to pay for it, although you will need a good credit rating to be eligible.
Some energy measures are already subsidised by energy suppliers, and some customers on certain benefits may be entitled to theirs for free. Take a look at our insulation, boilers and solar pages for more information.
Once you’ve taken out a Green Deal loan, you don’t have to stay with the same energy supplier. Your Green Deal will be fully transferable between suppliers as it is a fixed amount.