Going green is becoming more affordable as lenders offer discounted loans
The cost of adopting environmentally friendly practices is becoming more affordable, thanks to discounted loans offered by lenders.
According to a recent analysis by financial comparison website Mozo.com.au, green personal loan interest rates are, on average, 2.6% lower than non-green loans, The Australian reported. Additionally, loans for electric vehicles (EVs) have an average interest rate that is 0.9% lower than standard new car loans.
This trend is particularly beneficial for households grappling with the rising costs of retail electricity, according to The Australian. Mozo's analysis reveals that big banks and small lenders are increasingly offering lower rates for green energy renovations. As of Jan. 10, the average personal loan rate stands at 9.33%, while green personal loans have an average rate of 6.75%. Similarly, green car loans have an average rate of 6.56%, compared to the average rate of 7.44% for regular car loans.
Growing popularity of green loans
Australians are increasingly turning to green loans as a means to reduce their carbon footprint and lower costs, The Australian reported.
“Banks big and small are jumping on the green loan bandwagon, offering borrowers sustainable finance for solar at very low rates,” Mozo spokeswoman Rachel Wastell told the publication.
This year, green loans are expected to gain even more popularity among consumers.
Lenders embracing green loan offerings
Several lenders have already introduced green loan products to cater to the growing demand, according to The Australian.
For example, the Commonwealth Bank offers a green loan with an interest rate of 3.99% per annum for a 10-year fixed rate loan. This loan is specifically designed for mortgage customers who wish to install solar panels, battery packs, and EV charging stations.
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Smaller lender Queensland Country Bank also received a positive response to its green products in 2023. Additionally, the National Australia Bank plans to collaborate with listed fintech lender Plenti to offer green loans by the middle of this year, The Australian reported. With more lenders entering the green loan market, there is a possibility of increased competition for green loan customers.
Benefits and considerations
Green loans not only help individuals reduce their environmental impact but also offer potential financial benefits. Mozo's analysis suggests that customers who can afford sustainable purchases may have a reduced risk of loan default. Furthermore, sustainable home improvements can increase the value of assets, making green loan customers valuable to lenders.
However, it is important to note that while green loans provide an opportunity for borrowers to access discounted financing, the initial cost of implementing green technologies can be expensive, The Australian reported. Borrowers may need to make significant upfront investments to qualify for discounted green home loans. Despite this, the growing interest in smaller green loans for solar panels and other improvements indicates a rising awareness of the benefits of sustainable practices.
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